2nd mortgage / HELOC and BAD attorney advice leaves us in bad shape!

[Iamstuck]

Boy are we in trouble......Here is the cliff note version, any advice is appreciated:

Our well paid attorney told us that if we walk away from our house, we would NOT have to pay one penny to our 2nd mortgage in Chapter 13. We are on a 100% plan. Well, we did what the attorney advised so we we would not have to pay the 2nd, we spend a few thousand dollars to move, signed a lease on a new place. 341 hearing is done, monthly plan amount is set, we are 3 months into the program.

Today: We are told that we are responsible for the entire 2nd mortgage despite what our attorney told us. We are talking a HUGE amount of money here and we will simply be unable to pay as needed on our 100% plan within 60 months after they re-adjust our monthly payment to cover this debt.

We have the email thread where our attorney specifically tells us that we will not have to pay this and this is why we decided to walk away from our home.

[newbie2]

Who told you that you are responsible for the 2nd mortgage post bankruptcy?

My understanding is that they will be treated like all the other unsecured creditors (once the sale of your home is completed and the deficiency balance is known so that they can file a claim for that amount)

[MSbklawyer]

Who told you that you are responsible for the 2nd mortgage post bankruptcy?

My understanding is that they will be treated like all the other unsecured creditors (once the sale of your home is completed and the deficiency balance is known so that they can file a claim for that amount)

I will be treated as unsecured -- but they are paying 100%. Which is another way of saying 100% to unsecured creditors.

Can you modify your plan to lower your percentage? Presumably you signed up for 100% based on a debt amount that did not include your second mortgage.

[Iamstuck]

Who told you that you are responsible for the 2nd mortgage post bankruptcy?

My understanding is that they will be treated like all the other unsecured creditors (once the sale of your home is completed and the deficiency balance is known so that they can file a claim for that amount)

This Unsecured debt shows up on our online BK account and shows that they filed the claim. We contacted our attorney once we saw this and he said that we will be responsible for all of it because we are in a 100% plan.

The point is that we were advised before all this that if we walked away from our home, we would not have to pay the 2nd, so we did based on that information and now we do have to pay it.

[Iamstuck]

I will be treated as unsecured -- but they are paying 100%. Which is another way of saying 100% to unsecured creditors.

Can you modify your plan to lower your percentage? Presumably you signed up for 100% based on a debt amount that did not include your second mortgage.

I am not sure if we can lower the percentage? I am happy to say that the attorney has contacted me and we have a meeting Monday.

The 2nd was not included in the total to come up with our current monthly plan amount based on our "unsecured" debt because our attorney said we would not have to pay it, He was wrong....and we based MAJOR decisions on his mistake! We would not have walked away from our home had we be counseled with competence, that in itself just makes me sick!

[newbie2]

Iamstuck, don't panic. Your unsecured creditors will receive your disposable monthly income in your Chapter 13 plan. It sounds like your attorney needs to amend your plan to include the 2nd, and then revise the plan percentage accordingly. (For example, the unsecureds may now recieve 70% instead of 100%)

Good luck with your meeting on Monday and please let us know how it works out for you.

[NoTomatoCan]

Do you know how much of your DMI you are putting into the plan to fund it at 100%?

For example, if your monthly DMI is $1,500, but your payment is only $1,000 to get to a 100% payback, then your plan can (at the most) only increase by $500/month. But if your DMI is $1,100 then your payment only goes up by $100.

As Newbie points out, your payment can only increase to the point of your DMI. DMI is what controlls how much you payback, not the payback % listed on your plan.

[Iamstuck]

Do you know how much of your DMI you are putting into the plan to fund it at 100%?

For example, if your monthly DMI is $1,500, but your payment is only $1,000 to get to a 100% payback, then your plan can (at the most) only increase by $500/month. But if your DMI is $1,100 then your payment only goes up by $100.

As Newbie points out, your payment can only increase to the point of your DMI. DMI is what controlls how much you payback, not the payback % listed on your plan.

I am not positive as to the amount of DMI we are putting into the plan, but I can tell you we are not left with much. I would estimate that we are putting 85-90% of our DMI into our monthly Chap 13 planned payment.

[SMinGA]

If your plan payment is $X then it stays at $X even if the 2nd mortgage files a claim. It may just turn out that you're ultimately NOT in a 100% plan afterall. Unless your plan did not have all of your DMI going into the plan for some reason. (Normally DMI = plan payment.)

Example, using easy round #s: Your monthly payment to the 13, DMI, is $2,000. 10% trustee fee, so $1,800 each month goes to debt. x 60 = $108,000 to debt. If your priority debt is $28,000 that leaves $80,000 for unsecured. If you have $80,000 in unsecured to file claims - they get 100% payback. If you have $160,000 unsecured to file claims, it does not mean you pay more but that the claims get paid back at 50%.

[klandsb]

All I can say is your attorney really screwed up !!!! He should have to make it right & amend your plan according to your DMI.... Best of luck to you..

[parkd]

What is the point of being on a 100% plan? Why even claim bk then if you have to pay everything back?

[SMinGA]

There can be some benefits still parkd... Stop foreclosure, garnishments, etc. And debts paid back thru a ch. 13 no longer accumulate interest or penalty fees. Vehicle loans get some interest, but it may not be as much as the original contract rate.

Keep in mind - the % payback depends on the creditors who file a claim & what funds you have available for the monthly payment. The fewer that file claims, the higher the % payback since it is only counting those that do.

[Iamstuck]

What is the point of being on a 100% plan? Why even claim bk then if you have to pay everything back?

1. To Pay off our debt conventionally would have taken 20+ years assuming that B of A did not just hike our credit card rate for no reason
2. Taking responsibility for our debt. At the end of the day, we are responsible for the debt and paying back 100% over 5 years was the least we could do.

[parkd]

Well why not just use a debt consolidation service then? Seems to me that would be a better option if you are paying back 100% of the debt and just want to stop interest and fees from accumulating. BK is supposed to be used to shed debt and give people a new start, not pay it all back via a payment plan and turn the person into a debt slave. I just find this solution to be ridiculous and goes against the entire meaning of bankruptcy. Sorry, I don't mean to offend anyone so don't take it that way please.

[Iamstuck]

Well why not just use a debt consolidation service then? Seems to me that would be a better option if you are paying back 100% of the debt and just want to stop interest and fees from accumulating. BK is supposed to be used to shed debt and give people a new start, not pay it all back via a payment plan and turn the person into a debt slave. I just find this solution to be ridiculous and goes against the entire meaning of bankruptcy. Sorry, I don't mean to offend anyone so don't take it that way please.

None taken! Believe me, Chapter 13 was the absolute last resort. We looked at every option possible, plus we had property issues to deal with and BK seemed the best way though these obstacles as far as our attorney was concerned.

Our income made Chap 7 impossible and I really did not like that any way (call me crazy). I had to take some responsibility for where I got myself to sleep at night. We consulted and planned for 12 months before we made any decisions and it was not an easy one. But we did our homework and made choices based on lots of research. Funny thing is that our personal research we did has proved to be 100% correct, I sure wish I could say the same for our "professional" attorney.

We hired our attorney based on reviews for the most part. But in the end, we found out that they just don't care about your case as was evident with some of the results we encountered. On top of that, they made incorrect decisions because they either did not know the correct answer and or they just did not research the paperwork we gave them so they could understand our particular loans and details.

The sloppy work by our attorneys was palpable and unacceptable. We were at our 341 hearing and the judge was about to send us on our way. Me, my wife and my attorney were standing right in front of the judge when she looks up at my attorney and says "Have you advised your clients that they might be held personally liable for this 1st and 2nd loans". My attorney looked like a deer staring into your headlights! We go into the lobby and I looked at my attorney and asked that he explain himself. He said he needed to research before answering me. Bottom line, they did not understand the law, or our particular loans and that is why we are in this mess!

Luckily the date to file for all creditors was March 8 and our 1st mortgage bank did not file, so we are off the hook there. Problem is that the 2nd bank DID file and we are now on the hook for this.

I just lose faith when things like this happen, but what should I expect from an attorney after all right?