Negative AMort Mortgages-Chapter 13 cram down

[rav]

I have an adjustable rate negative amort mortgage on my single family home, and I am trying to strip off the amount added to my original principle under the guise of it being an unsecured debt, because the value of the property is less than the original loan.
The mortgage docs clearly say that there is a not to exceed 110% of value whereby differing of payments are added to "the principle amount I originally borrowed".
I look at this like it was a pre-approved line of credit based on the value of the property, with limitations.

Has anyone any advice, or can they cite any case law which supports this claim. I'm relying on 506(a), and the determination that this is not the original lien but a variable one?

RAV

[justbroke]

Well, 11 USC 1322 clearly reads that you can not modify the rights (terms of the mortgage and note) for creditors that have an allowed secured claim on your primary residence (regardless of it being only partially secured). What you're asking for is a modification of a primary residence mortgage and those are not done in Chapter 13s as they are specifically prohibited under 11 USC 1322 (b)(2).

11 USC 1322 (b)(2)the plan may-- modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims;

Technically, if you're challenging the security interest or the note under a different claim (other than a cramdown under 11 USC 506), then you need to create new case law in this area.

I'm pretty versed in 11 USC 506 and the affects of 11 USC 1322. I was going to use this on an investment property, but other things come into play when you attempt to cram down a mortgage in a Chapter 13. The most significant of which is that you'd have to payoff the entire cramdowned balance (is that a word?) during the life of the plan.

Since this is your primary residence, it's a non-starter, I think, unless you're going for new caselaw, and willing to take it to the Bankruptcy Appeals Panel (BAP), the U.S. District Court and perhaps the Circuit Court of Appeals.

[HHM]

Are you doing this on your own, or with an attorney.

The bad news, if this is a first deed of trust (or mortgage), you are dead in the water. I appreciate the novelty of your argument, but I think it is a loser.

Section 1322(b)(2) trumps section 506. If this is your primary residence, you cannot touch that first mortgage in any way. Bankruptcy courts have frequently encountered variable mortgages and I have yet, to date, heard of anyone being successful in what you are trying.

However, best of luck.

[rav]

Are you doing this on your own, or with an attorney.

The bad news, if this is a first deed of trust (or mortgage), you are dead in the water. I appreciate the novelty of your argument, but I think it is a loser.

Section 1322(b)(2) trumps section 506. If this is your primary residence, you cannot touch that first mortgage in any way. Bankruptcy courts have frequently encountered variable mortgages and I have yet, to date, heard of anyone being successful in what you are trying.

However, best of luck.

Maybe the use of cram down was inappropriate.
The mortgage/ 1st lien of the original balance is not being touched, what I am arguing is that the pre-approved line of credit, which was added to my original principle is actually unsecured now because the value of the property is less than what is owed.
The loan documents give the authority to increase as is necessary, much like a home equity line of credit. This is not eliminating any amount that was originally contracted for in the note and deed, just the additional amounts added afterward, which are now unsecured.
I appreciate the quick responses, and advice.

Regards;
RAV

[justbroke]

Doesn't matter in the context of 11 USC 1322. If you pledged the home as collateral, then that is a secured debt, and the anti-modification provisions in 1322 disallow a modification of a debt secured by your primary residence.

[HHM]

The problem, it is still the SAME deed of trust (or mortgage). You are confusing "payment options" with loan terms. Simply because the note allows YOU to choose to neg. amort. your loan, doesn't make it an unsecured line of credit separate and distinct from the mortgage. 1322 is quite broad, so long as the "mortgage" is on your primary residence, YOU CANNOT modify it, it does not matter how it is structured.

At any rate, that is what the bank will argue, and if I had to give odds. I say you have a 1 in 10 chance of winning. Sorry.