Chapter 13 Mortgage Lien Strips.

[NoTomatoCan]

I also have one RISK factor about my filing - I purchased my car with a signature loan that did not require a lien be put on the car (I used to have stellar credit - before divorce, job loss and real estate crash). Now I technically owe $19,000 on the car - but i have the white title. We are asking that I keep the car and continue to make the payments on the loan even tho there is no lien -- it gets paid off in 2 years 10 months. Our proposal is that once the car is paid for, we would redirect that payment into the reppayment of the remaining creditors for the last 2+ years of my 5-year payment plan under the Chapter 13. What do you think the Trustee will do?

So you received a signature loan (unsecured) that you happened to purchase a vehicle with?

Do you really "technically" owe $19k on the car? Wouldn't you just own the vehicle free and clear and the signature loan would be unsecured debt and treated like any other unsecured debt? I wouldn't think they could get preferrential treatment simply because you used that money to buy what is sometimes a secured asset.

Maybe I am looking at this wrong, but it seems like that signature loan is unsecured and should be treated as such.

Not sure what your exemptions are like in your state ad where you stand with your vehicle... something you might need to look at.

[Brokeinohio]

Vehicle Response

Yes - technically that is an unsecured debt and could be factored into my repayment plan along with all the other unsecured debt - and yes it was a signature loan and I could have used it to buy/pay for whatever I wanted. But at the time it was to buy a car, plain and simple. My BK attorney proposed that I continue to pay that loan outside of the other unsecured debt. My exemptions for the Chapter 13 are my home and my car - but it technically does NOT have a lien and it is worth $15k trade in value. If they make me SELL the car to pay unsecured creditors, how do I BUY a car with horrible credit so that I can actually keep my job? I guess it's up to the Trustee to make that decision. This is so confusing. My BK attorney told me they may add the car payment amount to the 5-year payback amount right out of the gate spreading what they collect across ALL creditors. Then the trustee would pay the unsecured signature loan.

Guess we'll have to wait and see.

[Brokeinohio]

Looked up the Ohio Automobile exemption

Ohio's auto exemption is only $3,225.00 - OMG I am probably screwed here - as the trustees get paid on that stuff. I looked up the trade-in value on my car and it's about $13-15k. What value do they use - resale, trade in or Suggested Retail Value?

[Brokeinohio]

Another Horrible Thought...

If they make me PAY the car payment amount to unsecured creditors - but I keep the car, that means I am paying for that car for 5+ years with only 2.7 years to go - I KNOW it's paying back unsecured debt, but in theory here.... They can't make me pay that $$ AND take the car - I can't afford another payment at that point - it's like I have to have a car to earn a living!? I expect the worse - it's just how it's gone these past 2-3 years!

[LadyInTheRed]

Ohio's auto exemption is only $3,225.00 - OMG I am probably screwed here - as the trustees get paid on that stuff. I looked up the trade-in value on my car and it's about $13-15k. What value do they use - resale, trade in or Suggested Retail Value?

The valuation source depends on your district. Many seem to use N.A.D.A. which tends to be high. My attorney used Blue Book private party value.

If they make me PAY the car payment amount to unsecured creditors - but I keep the car, that means I am paying for that car for 5+ years with only 2.7 years to go - I KNOW it's paying back unsecured debt, but in theory here.... They can't make me pay that $$ AND take the car - I can't afford another payment at that point - it's like I have to have a car to earn a living!? I expect the worse - it's just how it's gone these past 2-3 years!

They won't take the car. They will just require that your plan pays at least the value of the car (and any other non-exempt assets) to the unsecured creditors.

I really doubt your attorney's plan will work. You'll probably have to add what you consider the car payment to your monthly plan payment. It wouldn't be fair to the other unsecured creditors to treat the signature loan as a secured debt.

This is really off the topic of Mortgage Lien Strips. If you want to discuss it further, you should probably start a new thread.

[Poodleslover]

I filed chapter 13 in Dec 2009 with the intention to strip my second mortgage. I live in AZ and homes values have tanked. First mortgage 250k and second mortgage 50k. My home is worth 180K. My lawyer filed an adversary to strip the 2nd, the lender had 30 days to respond, they did not, by default the judge approved for the 2nd to be stripped once my chapter 13 is complete and discharged. But if for any reason I do not get a discharge, the strip is voided. My plan is $550/month for 36 months, just confirmed 4/23/10.

4 down, 32 to go. Very grateful.

Hope everything goes well for everyone.

[smkrishna]

After doing lot of research, I can see that only "If Spouse is on the Note on HELOC, then she is responsible for 2nd loan or HELOC".

In my case, my wife is not on HELOC Note but just on HELOC Mortgage as a Non-borrower Grantor. The words in Mortgage are as follows:
"Any Grantor or Trustor who signs this Deed of Trust, Mortgage but does not execute the Note or Credit Agreement ("Non-borrower Grantor or Trustor")
a) is signing only to grant, bargain, sell and convey such Non-borrower Grantor's or Trustor's interest in the property under the terms of this security instrument;
b)is not by signing becoming personally obligated to pay the Note or Credit Agreement;

In my case, my HELOC or second loan doesn't appear in my spouse credit report also. So, can any one tell me whether I can try to do second lien stripping without my wife filing for Ch.13, please??

[zeezee]

So, I filed ch13 last year and had an appraisal of my home done which came in at $500k. Since that time a few homes have been put up for sale in my court and (the neighborhood) for around $393 to $409k and going lower.

I owe $325k on my 1st and $96k on my 2nd ($421K tot). If a home is sold for about $325k, or I get another appraisal at that amount, will I be able to strip my 2nd mortgage? I am already in a 100% plan, so no extra would go to the plan.

[NoTomatoCan]

If a home is sold for about $325k, or I get another appraisal at that amount, will I be able to strip my 2nd mortgage?

Unfortunately almost certainly not. The price that controls is what your home was worth on the date you filed.

[pcn]

I wonder if you could voluntarily dismiss your current ch13 and refile. I'm not sure of the laws there, but for 96k I would personally see an atty about it. Sure it puts you behind in your current timetable to close, but can you "make" an additional 96k a year another way? (legally... )

[justbroke]

...get another appraisal at that amount, will I be able to strip my 2nd mortgage? I am already in a 100% plan, so no extra would go to the plan.

The value of property is set on the date the petition is filed. You can't go back and reset the value.

I'm unsure if I'd dismiss and refile. That's a strategy question and since you're 1 year in, that means a year wasted. However, the potential upside from a lien strip may be financially worth it.

[zeezee]

Thanks! Yeah, I don't think I want to do the dismiss thing. I guess I will just bite the bullet and live with it. I'll refi once it's all over. Thanks again for the responses...

[toughtimes08]

question for frankies_mom

Hi Frankies_mom,

I was reading a thread and noticed you had an almost identical situation as myself. Our second mortgage was paid off by United Guaranty after our bk7 was discharged late last year. They are the mortgage insurance company that paid off the second and now they want to collect on the second. We have modified the first and the current value of the home is what we owe on the first. The second is essentially worthless. United Guaranty has offered to lower the payment and essentially allow all of that payment to apply to prinicipal (2%).
I know you were in a similar situation with United Guaranty, did you ever try to offer a settlement amount with them? If so, how did that go? I just read another post where it looks like you are trying to strip the second in a bk13, so I assume it didn't go well. I would really appreciate it if you could bring me up to speed on your story with United Guaranty so that I can also try to get some direction on what to do with this worthless loan they want to collect on. Thanks so much!

[ShooFly]

The chapter 13 section of the BK code specifically restricts what you can do with the mortgages on your "primary residence" (namely, you can't do anything with the 1st, and you can strip the 2nd only if there is no equity securing it, other than that, you cannot do anything to primary residence mortgages).

However, there is no such restriction on investment properties (i.e. rentals, flips, etc). Note, the original loan on these second properties must specifically state that the home was not to be a primary residence. Thus, you can modify and strip mortgages on investments properties. Although that sounds good, it is really not all its cracked up to be, because any action you take on these mortgages, must be fully complete within the 60 months of the chapter 13 plan. 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.

Hi HHM... do you know if that would that apply to an "owner occupied triplex"? That's what I have, my primary residence is also my income property. I have a 2nd HELOC. Thanks.

[HHM]

Hi HHM... do you know if that would that apply to an "owner occupied triplex"? That's what I have, my primary residence is also my income property. I have a 2nd HELOC. Thanks.

Probably. But banks are getting more aggressive about fighting this sort of thing. Keep the caveat in mind, if you "cram down", you MUST pay the new value IN the chapter 13 plan. The issue might turn on how the property is recorded and taxed at the county. If there is only ONE parcel number for all 3 units, you will probably lose and the loan will be considered a primary residence loan since you live there. If each unit has its own parcel number, then you will probably win and be able to cram down.