Chapter 13 Mortgage Lien Strips.

[HHM]

So if I understand correctly,

If a property was initially a primary residence, then converted to a rental a few years later, the stripping would "NOT" be an option because the original loans were for primary residence purposes.

Correct, for the most part.

If an inferior lien has ZERO value you can still strip it. Also, if you can afford to pay the value of a crammed down inferior lien, you can still cram it down. What you would not be able to do is cram down the first on a home you owned for which the loan was stated as primary residence even if you later moved from the property and rented it. The rule for primary residence is the "intent of the loan".

[TooMuchCredit]

I just got informed that lien stripping is not done in my district - Northern Georgia. Has anyone here actually stripped a lien in N. Georgia so I can prove the contrary? I thought the rulings had said they were allowable throughout the 11th circuit, but maybe it still varies by district?

[sirlostalot]

I am new to BKForum and may be missing something but wasn't there a bill floating to the House Judiciary Committee that suggests allowing Chapter 13 trustees to modify primary residences? I have heard very little about this recently (just the Obama mortgage plan is discussed - which appears to be a lot of hot air). It doesn't make a bit of sense that someone may modify a vacation home loan and not a primary residence in Chapter 13. BTW- we are in pre-filing stage (dark days) and BKForum has been very informative! Thank you.

[HHM]

I am new to BKForum and may be missing something but wasn't there a bill floating to the House Judiciary Committee that suggests allowing Chapter 13 trustees to modify primary residences? I have heard very little about this recently (just the Obama mortgage plan is discussed - which appears to be a lot of hot air). It doesn't make a bit of sense that someone may modify a vacation home loan and not a primary residence in Chapter 13. BTW- we are in pre-filing stage (dark days) and BKForum has been very informative! Thank you.

Yes, see this thread

http://www.bkforum.com/showthread.php?t=34932

But nothing has passed yet as of writing this post.

[bkause]

For example, if you have a rental property that is worth $150K but you owe $200K, you "can" cram down that mortgage, but the CATCH is, you must pay the cramed down amount ($150K) within the chapter 13 plan, i.e. within 60 months. And no, you cannot modify interest rate.[/QUOTE]

HHM... does this cram down rule apply to all states? I haven't had one attorney mention that to me when I spoke to them about my Investment property. We would owe about $300,000 which would make it impossible for us to afford the BK.

[samson420]

How area specific is all of this information?

I live in AZ and I went to one of those big time on TV BK Lawyers. They stated that we do not qualify for a 7 and only qualify for a 13, since we make way too much money.

I am fine with a 13 since I want to keep our house. I asked if there is anything I can do with our second mortgage and they said absolutely not.


Then I started researching on how I can get rid of the 2nd mortgage, and all of this should work in my situation.

I owe:

205k on the 1st
51k on the 2nd

The house has been apraised at 153k

My only question is. Can get rid of the 2nd and file a chapter 13 in AZ?


Sorry for a very long winded 1st post. . . . . .

[steak]

After all, only about 40% of chapter 13's actually make it to discharge.

HHM, what exactly do you mean by this?

[HHM]

HHM, what exactly do you mean by this?

That means that 60% of chapter 13's end up dismissed at some point or converted. Usually, the debtor's circumstances change such they can no longer make the payment and the case ends up getting dismissed.

[lrprn]

HHM, what exactly do you mean by this?

Actually studies done for many decades by consistently show that only around a third of Ch 13 cases actually make it successfully to discharge - see http://www.bankruptcylawinformation....event=dspStats

The other two thirds of the chapter 13 bankruptcy cases are either dismissed or converted to a chapter 7 bankruptcy.

The primary reasons for this are that many things can happen to filers over 3-5 years - divorce, job loss, serious medical problems, etc. Ch 13 requires sufficient disposable income to support a plan. Anything that significantly reduces disposable income makes completing a Ch 13 successfully very difficult.

[IBroke]

...serious medical problems...

Wouldn't that also make a hardship discharge possible?

[lrprn]

Wouldn't that also make a hardship discharge possible?

A Ch 13 hardship discharge is possible under very specific circumstances:

** The inability to complete payments has to be due to circumstances tha the filer can't be held accountable for - death of the filer, accident, job loss, etc.

** The filer is unable to modify the plan to fix the problem.

** The general unsecured creditors have to receive at least as much in Chapter 13 distributions as they would have received in a Chapter 7 liquidation.

The hardship discharge is more limited than the normal Ch 13 discharge and does not apply to any debts that are nondischargeable in a chapter 7 case.

Since there’s a hearing required before the bk court before a hardship discharge can be granted, it's not a do-it-yourself project.

See http://www.uscourts.gov/bankruptcyco....html#hardship and http://www.************************/...-discharge/for more detailed information.

[worldBfree]

Correct, for the most part.

If an inferior lien has ZERO value you can still strip it. Also, if you can afford to pay the value of a crammed down inferior lien, you can still cram it down. What you would not be able to do is cram down the first on a home you owned for which the loan was stated as primary residence even if you later moved from the property and rented it. The rule for primary residence is the "intent of the loan".

Hi, forgive me as I'm new here but to be clear- I can strip the 2nd mortgage on my condo because;

1. My condo used to be my primary residence but now I am renting out.
2. The value is now worth less than the 1st mortgage.
3. I will be filing chpt13.

I am confused because 1 attorney has told me that I could strip the 2nd on rental property while another has told me I could not. I'm not after a cram down, only the lien strip on the 2nd. Could you clarify? Thank You!

[CH33 Paralegal]

in a 13, you don't get credit for mortgages that you are surrendering or stipping.

[CH33 Paralegal]

yes, the law is meant for homeowners, not for-profit landlords.

[TooMuchCredit]

I just got informed that lien stripping is not done in my district - Northern Georgia. Has anyone here actually stripped a lien in N. Georgia so I can prove the contrary? I thought the rulings had said they were allowable throughout the 11th circuit, but maybe it still varies by district?

Edit: turns out it can be done in my district. It has to go before a judge however and costs above and beyond the flat Ch. 13 fee.