Chpt 13 1st/2nd mortage question

[bmp]

Just curious, I haven't had my first meeting with attorney yet, but I was wondering in a chapter 13, is it possible to roll all un-secured debt and 2nd mortgage into the plan, and keep your first mortgage to prevent losing your home? Thanks!

[justbroke]

Well, your terminology isn't correct, but I hope I can bridge that gap and help you understand. First, unsecured debt isn't really treated by the plan, except that the unsecured creditors get the "scraps" left after paying your administrative (attorney/trustee), priority (taxes) and secured (house, car, etc) expenses.

If your home is worth less than the value of the first mortgage, you can do something called a "lien strip". This allows you to remove the second mortgage as a lien against your home. This then makes the second mortgage unsecured. This means it does not get "secured" debt status in your plan and is treated like the other unsecured debts. In other words, the 2nd mortgage holder would get scraps just like the other unsecured creditors. At the end of your Chapter 13 and once you receive the discharge, there will be no more 2nd mortgage!

Yes, you can keep your home if your plan provides for payment of at least the secured debts against the home (like the first mortgage).

Hope that helps.

[bmp]

Appreciate that information! Sounds promising. It's hard to say if my home is worth less than my first mortgage though. Anyone know what the deal is if my home is worth more than the first mortgage? I know it's close. It's in a short sale status right now for 11,000 less than I owe on my first mortgage.

[lrprn]

Anyone know what the deal is if my home is worth more than the first mortgage? I know it's close.

If your home is worth even $1 more than your first mortgage, then you cannot strip the second mortgage in a Ch 13 bankruptcy.

Depending on the local customs of your bk court, they may accept a realtor's estimate of your current home value. Ask your current realtor and several more experienced realtors in your area to price your home for a "quick sale". You can also check for "comparables" in your neighborhood that have sold in the last few months.

The ironclad way to get an estimate of the house's current value (and what some bk courts require) is to pay for an official certified estimate to be done.