Chapter 13 Mortgage Lien Strips.

[justbroke]

Can you point me where I can read the Florida law online to question her?

It's not Florida Law... it's 11th Circuit Court of Appeals, as well as the Bankruptcy Code. Anyone practicing in the Middle District of Florida knows this stuff (or should know it).

Here are excerpts from "lien strip" forms, that is readily available on line, for the different Divisions within the Middle District of Florida.

ORLANDO

4. Upon entry of a discharge, the Lien is avoided and extinguished automatically without further order; provided, however, if the debtors fail to make all required payments and no discharge is entered, the Lien shall survive and remain fully enforceable.

TAMPA

4. The mortgage held by ABC Mortgage Company recorded on April 1, 2002, at Book XXXX, Pages XXXX, Instrument No. XXXX of the official records of Hillsborough County, Florida, shall be deemed void, and shall be extinguished automatically, without further court order, upon entry of the Debtor’s discharge in this Chapter 13 case; provided, however, that
the Court reserves jurisdiction to consider, if appropriate, the avoidance of ABC Mortgage Company’s mortgage lien prior to the entry of the Debtor’s discharge.

What does she mean by "finer" explanation?

Probably because you took one of the more harsh statements from HHM's thread which indicates that you would lose the house. HHM is absolutely correct that it could put you in a bad spot with the 2nd lienholder, but with home prices today, the likelihood of the 2nd lienholder actually foreclosing (when you are underwater on the first)... is extremely low.

Do you know of any workarounds besides the hardship 13 discharge?

Absolutely none. There are no workarounds. This is the law. And don't kid yourself, Hardship Discharges in a Chapter 13 aren't easy. There was a recent article on Bankruptcy Law Network in which a the debtor killed her joint debtor spouse. He Motion for a Hardship Discharge was rejected. Generally, you'd have to show a real debilitating disease, or other condition, which prevent you from ever working again.

http://www.************************/...arge-for-wife/

[clos96]

Thanks to all of you who have responded.

I am meeting with her on 8/12 and will post a reply once I hear what she has to say.

I actually work representing Fannie Mae in helping borrowers stay in their homes so I know that at least the bank that I work for is not foreclosing on the 2nd lien. They're pretty much just charging off the lien off the books but it still does remain on title.

I do have one more question though, what does the "Default Judgment" do on a lien strip. In short, the recorded document states that the lien is wholly unsecured under the provisions of 11 USC & 506.

I'm guessing the provision is what states what I don't want to hear correct?

Talk to all of you next week.

[justbroke]

I do have one more question though, what does the "Default Judgment" do on a lien strip. In short, the recorded document states that the lien is wholly unsecured under the provisions of 11 USC & 506.

The lien strip is done based on 11 USC 506. The default judgment, just means that the creditor didn't contest the lien strip. It's not that 11 USC 506 specifically states how you can treat a creditor, the real reason is buried in multiple parts of the BK code. Specifically, it has to do with what happens with a discharge, and what the rights are of creditors who have a security interest in property. If you don't receive the discharge, then most things that happened inside the Bankruptcy are undone.

[turnipblood]

Two questions. First, can you use the county's tax appraisal value for this purpose (they just redid it this month), or does it have to be a separate appraisal?

Second, we're rightside up on the mortgage by about $1200 with the county's value. If we go on a loan forebearance with BOA for two months, will that raise the principal, put us upside down, and make the strip possible?

[justbroke]

Two questions. First, can you use the county's tax appraisal value for this purpose (they just redid it this month), or does it have to be a separate appraisal?

Using the County's Tax Appraisal value is about as useful as Zillow. Seriously, the County makes up a number so that the tax-base covers the County budget... or they just raise the millage rate. In either case, it doesn't reflect actual market value. The least you should get is a Comparative Market Analysis (CMA) from a Realtor, and best case, an appraisal on the Uniform Residential Appraisal Report (URAR) performed by a license appraiser.

Justbroke says: if you're doing a lien strip, a URAR is best evidence of value. Only an expert witness, giving testimony at a hearing, carries more weight.

Second, we're rightside up on the mortgage by about $1200 with the county's value. If we go on a loan forebearance with BOA for two months, will that raise the principal, put us upside down, and make the strip possible?

Generally, the principal is never raised, but the "balance" is. My principal on my primary residence is exactly where it was the day I filed. I have $30K in arrears, but they have been added to the balance not the principal.

Now that I clarified that, the lien stripping is based on what is owed to the lender, not the principal balance. I was able to lien strip because my balance was about 9% over the value returned by my appraiser. If they went with the principal amount, I would probably not have been able to lien strip, as the principal amount and the appraisal were only $5K apart.

[turnipblood]

Thanks for the great response. The only thing I found confusing is when you seem to imply that if your principal and your appraisal were too close together (5k) then you couldn't have done it. I thought the idea was if you owed even $1 more on the first than the appraisal, then the strip can't happen. Maybe you mean without the arrears your principal alone was 5k LESS than the appraisal?

[justbroke]

Thanks for the great response. The only thing I found confusing is when you seem to imply that if your principal and your appraisal were too close together (5k) then you couldn't have done it. I thought the idea was if you owed even $1 more on the first than the appraisal, then the strip can't happen. Maybe you mean without the arrears your principal alone was 5k LESS than the appraisal?

No implication at all. If your balance and your appraisal are close, you just may get a challenge from the creditor on the valuation. In the end, the valuation is always up to a challenge by the creditor even when it's $30K or more apart.

I just like to warn people that the closer the appraisal is to the balance of the claim the more agitated the creditor may be and hence up for the challenge.

[turnipblood]

Thanks! Great info.

[SCRuth]

Question about lien stripping

My husband is planning to file BK. The only debt that is in both of our names is the second mortgage. We owe about 132,000 on the first and 72,000 on the second. I would be scared to venture the value of our home. We paid 144,000 at the height of the market and our house currently needs some work on it so I would guess 130,000 but it could be more.
My question is, if he is filing Chapter 13 (in SC) and we are jointly on the 2nd (first is only in my name) is it possible to strip the second (if it is totally unsecured, of course)?

[justbroke]

My question is, if he is filing Chapter 13 (in SC) and we are jointly on the 2nd (first is only in my name) is it possible to strip the second (if it is totally unsecured, of course)?

You would need to file a Chapter 13 together. Otherwise, the bank would come after you, if only he filed. (Unless SC is a community property State, and I don't have the energy to look.)

[ch13ds]

Hello All,

I am new to this BK thing. we filed a ch 13 in July due to job lost. I have a first and second with the second being stripped and unsecured debts. We are stripping the second and unsecureds. We already had the 341 and the only they needed was a Decl of contribution from a family memeber since we don't make enough. I'm on EDD.

I was supposed to be confirmed on sep 2 but needed to ask for an extension due to the house value. I got another appraisal and was below my loan value, so that's good. My new conf is on Nov. 4 - along ways out. I still don't have a job, but may land one real soon. My question is, should I take the position after my confirmation date? Would that affect my ch 13 situation? With the new salary, it will put way above and would give us room to breath moving forward and being able to save.

Our main objective is to save our home. That is all that we have and matter. Any problems that I need to worry about?

Any advise will be good.

[HHM]

Hello All,

I am new to this BK thing. we filed a ch 13 in July due to job lost. I have a first and second with the second being stripped and unsecured debts. We are stripping the second and unsecureds. We already had the 341 and the only they needed was a Decl of contribution from a family memeber since we don't make enough. I'm on EDD.

I was supposed to be confirmed on sep 2 but needed to ask for an extension due to the house value. I got another appraisal and was below my loan value, so that's good. My new conf is on Nov. 4 - along ways out. I still don't have a job, but may land one real soon. My question is, should I take the position after my confirmation date? Would that affect my ch 13 situation? With the new salary, it will put way above and would give us room to breath moving forward and being able to save.

Our main objective is to save our home. That is all that we have and matter. Any problems that I need to worry about?

Any advise will be good.

In a chapter 13, you are required to devote ALL disposible income to the chapter 13 plan during the life of the plan, so, "technically" if you start making more money (significantly more money), the plan is to be amended. It sounds like that if the court needs the declaration from the family member, that is because of your income situation, your plan would not be confirmed because you don't make enough to fund the bare minimum (to save the home).

[southernbelle]

I have a stupid question about lien stripping.

If I have 2 mortgages and several liens from taxing authorities. Does the seniority of the liens depend on when they were filed and can the liens for taxes be stripped if they have no value after all other liens are deducted from the value of my home? Can an IRS lien be stripped?

[HHM]

Yes, an IRS lien can be stripped. But it gets stripped under 506 not under 1322(b). Not that it matters, different code section, same result.

[Wealth]

Protection Payments

When performing a lien strip on a 2nd mortgage of a principal residence, are you required to make adequate protection payments until the final confirmation or can you stop making payments assuming that you will be stripping the lien?