bifurcated secure debt

[vincent]

Has anyone has sittuation that lenders bifurcated secure debt after the chapter 13 bankruptcy filed?

We don't have any unsecured debt but have a upside down mortgage of $130,000 on our vacation condo . we have $110,000 in assets. we make around 160,000 $ a year.Do you think the lender will bifurcate the secure debt whenwe file for chapter 13?

[Brazzy]

Maybe you can elaborate a bit more. Are you asking if a secured creditor will bifurcate their claim when you filed for chapter 13?

[HHM]

It is not the lender that bifurcates its, it is the BK code that does it.

In BK, if the property is only worth $60,000 and you owe $100,000; the creditors has a secured claim for $60K and an unsecured claim for $40K.

What are your intentions with the condo? This bifurcation only matters if you are surrendering.

Also, what is the back story here...why are you considering BK if you have $160K income and no unsecured debt?

[vincent]

elaboration on previous question.

Has anyone has sittuation that lenders bifurcated secure debt after the chapter 13 bankruptcy filed?

We don't have any unsecured debt but have a upside down mortgage of $130,000 on our vacation condo . we have $110,000 in assets. we make around 160,000 $ a year.Do you think the lender will bifurcate the secure debt whenwe file for chapter 13?

We bought the condo 2005 for $360,000. paid in $100,000 at closing. now the market value is $150,000. I am tired of paying too much every year the negative cashflow. It is a investment property. I paid enough the last 5 yrs.

Now, I know the bank wouldn't allow shortsell because we make too much money. We don't have morgate of our primary home. Chapter 13 is the only option. But we worry the bank will bifurcate their claim.

[catleg]

I'm not sure I understand, you said you owe 130k and it's worth 150k. I'm sure with HOA fees you're sending checks not getting checks. But a ch13 isn't really going to help this situation, you have to sell it.

[HHM]

We bought the condo 2005 for $360,000. paid in $100,000 at closing. now the market value is $150,000. I am tired of paying too much every year the negative cashflow. It is a investment property. I paid enough the last 5 yrs.

Now, I know the bank wouldn't allow shortsell because we make too much money. We don't have morgate of our primary home. Chapter 13 is the only option. But we worry the bank will bifurcate their claim.

Sorry to say, you are SCREWED. Yes, the portion of the mortgage lenders claim that cannot be satisfied by the foreclosure sale of the condo becomes an unsecured debt, and if your disposable income allows (which it almost certainty would), they would be paid through the chapter 13. Unfortunately, I don't think BK is your answer here. You are between a rock and a hard place. You are probably better off letting the condo go to foreclosure and negotiating a resolution when the deficiency goes into collection.

[vincent]

more elaboration on condo

we owe 290000 on condo, it isworth about 150000, we are upside down about 130000 to140000....we make 160000 a yr with no other debt.we can afford to keep paying .we rented it out for ther last 4 yrs (1200 AMONTH)..we dont want to throw ANY MORE money into bad investment..my lawyer say we can declare 13 bk and gmac our lender would most likely discharged the 140000 debt rather than do short sale or foreclosure, because it is easier for lender to come after me for def judgement in short sale or forclosure..????is this true??back to my original question...he said the bank can file bifurcated judgement and still come after me for 140000?? but most likely they wont because it is harder in 13 bk

[HHM]

2 thoughts

1. Your attorney is saying one thing (the right thing), and you are hearing something else
2. The attorney is an idiot.

What you wrote doesn't make sense.

If you file 13, it is no sweat off of GMAC's back to file a proof of claim and get paid through your monthly chapter 13 payment.

[NoTomatoCan]

If you file 13, it is no sweat off of GMAC's back to file a proof of claim and get paid through your monthly chapter 13 payment.

True that.

Isn't it almost easier for GMAC to collect on the deficiency through the plan than if they had to pursue collections outside of BK? I would think that either way they will end up foreclosing (have to petition to lift the automatic stay in the BK, but that won't be an issue) and once it sells for market value, the remainder that you owe will get paid via the plan. No need for GMAC to have to go through the work of trying to collect on the deficiency as they would need to do without the BK.

[vincent]

more questions about my condo

this is all very confusing for me ... i have 2 lawyer that said it is most likely that gmac will discharge total amount i owe (about 140000) if i file 13 bk..is this true?? most of you disagree with my lawyers on this point...are you saying they are more likely (what percentage??) or not liklely to come about after me for the 140000???

[NoTomatoCan]

this is all very confusing for me ... i have 2 lawyer that said it is most likely that gmac will discharge total amount i owe (about 140000) if i file 13 bk..is this true?? most of you disagree with my lawyers on this point...are you saying they are more likely (what percentage??) or not liklely to come about after me for the 140000???

They won't "come after you". They will simply file a claim as part of your BK - standard operating procedure.

The deficiency becomes unsecured debt, and upon completion of your plan, it is discharged.

But you make $160k per year and have no other unsecured debt. Unless you have some really big legitimate expenses that off set most of that income (would be very difficult for $13.3k) it seems likely you would be paying a good portion of that debt back via your plan.

[Brazzy]

Let me explain something here on the part of claims. The way the claim is filed is driven directly by the plan. The plan deadline is far before the POC deadline so the plan will pretty much always come first. Its the plan that will decide how the claim is filed. The creditor will look at how they are treated, how the collateral is valued, and how much is being paid to unsecured creditors. In its entirety this is how a POC is created. They are going to let you put a value to the collateral first. They arent going to give themselves away and file a claim with a value. They will look at the value and the % to unsecured and see what will work best for them. Either file the claim to match the plan, or file an FU claim (full amount secured) and follow it up with an objection (in the districts that need it).

[HHM]

Okay...

I think we are talking past each other, my sense is, your lawyers are saying the same thing, but something is being lost in translation.

Let's see if we can sort this out.

The house is going to foreclose. The 2nd mortgage (GMAC) is not going to get anything from that sale. The lawyers you talked too are correct in a narrow sense. GMAC's debt will be discharged once you receive a chapter 13 discharge (after 5 years of monthly payments). HOWEVER, a chapter 13 is a payment plan. You will make a monthly payment to the chapter 13 trustee (and with over $13K per month in income, that payment will be rather high). Once the home forecloses, GMAC is left with an unsecured claim against you. Thus, after foreclosure, they now have a non-contingent, liquidated claim for the balance of the loan, and that balance is an unsecured debt. That unsecured debt, can be paid through the plan.

Once the foreclosure is complete, GMAC has a claim against you personally for the debt and can get paid as part of your chapter 13 plan.

Maybe where you are at, GMAC, as a practical matter, doesn't care and won't file a POC. However, given the amount of your income, the BK Trustee WANTS TO GET PAID, and will probably prod GMAC to get on board.

[catleg]

You're totally missing how a ch13 works.

It is based on your budgeted capacity to pay, with a bottom limit that the creditors have to get at least as much as in a ch7 liquidation. By any test ch13 is unfavorable for your cirumstances.

Question is, what state law governs the condo mortgage and what rights do they have to come after you for a deficiency. That's really where you need to go with this, and/or debt settlement negotiations with GMAC.