Do I have to be current on my second mortgage?

[john_smith]

I am planning on filing chapter 13 in September. The idea is to strip the second mortgage and avoid some credit card debt.
My question is:
Do I have to be current on my second mortgage to be able to file chapter 13 with lien strip on it or not?
I was planning to stop paying my second mortgage and credit cards after May.

[StartingOver08]

No you do not have to be current. Stop paying the 2nd.

[justbroke]

Do I have to be current on my second mortgage to be able to file chapter 13 with lien strip on it or not?

You do not have to be current on any mortgage to enter a Chapter 13, and you certainly don't need to be current on any debt where you're going to avoid (strip) the lien!

You need to make sure this is what you want to do, because if you can't strip it, then you'll be paying the arrearages in your Chapter 13 plan.

[indebt00]

My lawyer told us to continue to pay ours even though we will be attempting to lien strip. I am guessing its to be safe.

[maddog2112]

What is this lien strip about? When I filed my 13, we had an 80k equity loan and nothing was ever said about a lien strip.

[justbroke]

What is this lien strip about? When I filed my 13, we had an 80k equity loan and nothing was ever said about a lien strip.

Some lawyers never mention it. Let me be more clear, certain "no look" attorneys will file a Chapter 13, but only do a "straight" filing. I consider a "straight" filing to be one that does not have any "contested matters" or "complaints" involved. Lien stripping is done by contested matter (by motion and least expensive) or as a complaint (most expensive).

Also, to do the lien strip, the value of your property must be less than or equal to (by the exact dollar amount) your first mortgage. Otherwise, you can't strip the mortgage.

So, your lawyer may have looked at your home's value and just thought that it was not at a value to strip any of the junior liens... or... your lawyer just doesn't like to do lien strips and cram downs (on cars).

[flnybk]

So you can't strip if there is any equity for a loan? my first is $270. I think the home values here are $320. Our second and third lines are $150,000.

i heard we can't short sale because their are two banks involved too. Should I contact 2nd/3rd line bank to ask them about a short sale instead?

[justbroke]

So you can't strip if there is any equity for a loan? my first is $270. I think the home values here are $320. Our second and third lines are $150,000.

Exactly. If the value of the home exceeds the balance on the first mortgage, you can't strip the second mortgage. This is because the second mortgage is "partially" secured. Even if it's $1.00!!!

i heard we can't short sale because their are two banks involved too. Should I contact 2nd/3rd line bank to ask them about a short sale instead?

Difficult to say. Yes, having 2nd, 3rd and other junior liens make it that much more complex, and that much more unlikely.

[BigJohn]

So you can't strip if there is any equity for a loan? my first is $270. I think the home values here are $320. Our second and third lines are $150,000.

i heard we can't short sale because their are two banks involved too. Should I contact 2nd/3rd line bank to ask them about a short sale instead?

Is your 'low' real appraisal for your home less then or equal to 270K? If it is, you can lien strip.

[walkthaplank]

So you can't strip if there is any equity for a loan? my first is $270. I think the home values here are $320. Our second and third lines are $150,000.

i heard we can't short sale because their are two banks involved too. Should I contact 2nd/3rd line bank to ask them about a short sale instead?

You need to have an appraisal done. You might be surprised where that appraisal comes in. Real property values are still dropping like rocks. My house appraised at about half of what it did 2 years ago.

[indebt00]

We are going to try and lien strip a 3rd mortgage. Our value is below the balances owed on the 1st and 2nd. not enough to get rid of the
2nd too. I sure hope it works because it means being able to afford to eat during our BK pymts...

[pcn]

We are going to try and lien strip a 3rd mortgage. Our value is below the balances owed on the 1st and 2nd. not enough to get rid of the
2nd too. I sure hope it works because it means being able to afford to eat during our BK pymts...

Not questioning your lawyer, but interested in that last line about eating
My attny told us that if the lien strip is successful, the amount of the 2nd payment just goes back into the unsecured pot, so the overall payment really doesn't change. Payment + 2nd outside the plan becomes (payment + 2nd)
inside the plan. Either way we pay the total amount, just with the strip, it ends up as a fraction of what we would have payed over the entire life of the second. Plus it gives you more disposable income to consider, to make sure you use up all you can, to arrive at the lowest possible payment (think new car payment). JMHO

[justbroke]

pcn, you are right. There is one exception though. That is when the debtor has a negative DMI when including the payment for the subordinate lien. While stripping the lean does make it unsecured debt, adjustments to the DMI are possible, thereby allowing the debtor to live by not using his "allowances" to pay for secured debt.

I know this personally, because I'm in that boat. I technically have a negative DMI. I take money from my allowances to contribute to the plan towards debt service on my secured claims (and the $530+ a month the Trustee gets for writing checks0.

[pcn]

Justbroke, I'm not sure I understand. Can you please explain more? Maybe an example using some made up figures (not being nosing about your situation, just thought that might make it more clear.) Thanks!

[justbroke]

Made up figures.

Debtor has $200K first and $100K second. The debtor has no arrears on his mortgages (he's current). Debtor pays $1,000/month on the first and $500/month on the second. The debtor calculates that he has a negative DMI of -$650.00. The unsecured creditors would get $0.00.

The Debtor then decides to strip the second lien. The debtor recalculates his DMI and it's now -$150.00. The unsecured creditors still get $0.00. That's because the $500/month payment is rolled back into the payment calculation, bringing the -$650 to -$150. Had the debtor already had a positive DMI, the entire amount of the second mortgage payment, would just go to unsecured creditors. Funny thing is, that the second mortgage holder becomes an unsecured creditor, so, usually, most of the (unsecured) payment goes to them anyhow.

In the case presented though, where the debtor's initially calculated DMi was -$650, the $500 payment didn't affect his payment to unsecured creditors. They would still get $0.00.