Mortgage Cramdown/Modification

[Sham11801]

I've been reading alot of the forums but havent quite found a specific answer to my specific issue so i'll ask. HHM, i've noticed you to be quite informed on this topic but i'll leave it open for anyone to share ofcourse.

I assume there is no amendment to the BK law as of yet to include a mortgage modification when you file. What im looking to do is reduce the principal balance to match the current value of the home. Purcahsed in 2005 for $488,000 and is currently worth about $400,000. Im anticipating going forward and filing within the next month or two (have been waiting for a year) and was wondering if it seemed prudent to anyone for me to wait and see if the laws change for the better (for us consumers). Thank you for your assistance

[HHM]

Presently, there is no way within BK to accomplish that goal of cramming down your main or first mortgage.

Here is section 8 of the Senate Bill S-61 (the bill that is to amend the BK code).

SEC. 8. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date- Except as provided in subsection (b), this Act and the amendments made by this Act shall take effect on the date of the enactment of this Act.
(b) Application of Amendments- The amendments made by this Act shall apply with respect to cases commenced under title 11 of the United States Code before, on, or after the date of the enactment of this Act.

Basically, the amendment will be applicable to any case that is open at the time the bill passes and any case filed afterward. Assuming this section of the bill survives committee, you would not need to wait to file.

[Sham11801]

Thanks forthe info HHM. Regarding todays news on modifying mortgages for those who are even current (like me), do y ou think they will allow this type of modification post-bankruptcy as well? I knwo there arent any specific details as of yet. What are your thoughts

[NEWBIE911]

Presently, there is no way within BK to accomplish that goal of cramming down your main or first mortgage.

Here is section 8 of the Senate Bill S-61 (the bill that is to amend the BK code).



Basically, the amendment will be applicable to any case that is open at the time the bill passes and any case filed afterward. Assuming this section of the bill survives committee, you would not need to wait to file.

Good stuff. Does that mean even after confirmation , it can apply?

[HHM]

Good stuff. Does that mean even after confirmation , it can apply?

As written right now, I would say yes.

[eddiep]

HHM

I have a question on this potential bill too.
I am current on my mortgage payments but need the terms extended to lower my monthly payment. We pass the median income test based on past 6 months, but would not going forward but would still pass the means test. we have $150k in unsecured debt. Is there a way to discharge this debt in chapter 7 and get my mortgage reduced under chapter 13? How would this play out?

[eddiep]

I have to be current on my mortgage to file chapter 7, but it sounds like I have forclosure notice under this proposed bill. Am I understanding this right?

[HHM]

HHM

I have a question on this potential bill too.
I am current on my mortgage payments but need the terms extended to lower my monthly payment. We pass the median income test based on past 6 months, but would not going forward but would still pass the means test. we have $150k in unsecured debt. Is there a way to discharge this debt in chapter 7 and get my mortgage reduced under chapter 13? How would this play out?

That is an interesting question...generally speaking, for any sort of modification, cram down, etc to stick, the BK must ultimately get discharged. If you attempt the so called "chapter 20" to try to modify the mortgage (assumingt the bill gets passed), I am not sure (nor is anyone else for that matter), whether you could do that. You cannot receive a discharge in a chapter 13 if you have a prior discharge within the last 4 years.

[eddiep]

what is a chapter 20, have never heard of that before?

[optimistic1]

what is a chapter 20, have never heard of that before?

Its not an actual Chapter, its just doing a Chapter 7 to rid yourself of the unsecured debt, and then immediately after discharge, you then file a Chapter 13, hence the 20, 13+7=20, so that you can benefit from each of the laws under each individual chapter.

You can basically file a 13 the day after a Chapter 7 discharge. The 4 year rule applies only to the discharge, not the filing. So, if you confirmed a 49 month to 60 month plan in a 13, you would be perfectly entitled to do so.