Cram down or strip of a 3rd mortgage?

[highlife]

We are looking at the pros and cons of a 7 vs. 13. We would like to keep our house, valued on the county auditors site at $318K. We have a first of about $125K, a second (heloc) of about $161K. The bank where we had our business loan has third position on the house. There note is for about $580K, the amount of our business loans. Since we have enough equity in the house to cover the first and second, with a possible small amount left for the third, is there anything that can be done with cramming down or stripping the third? I have received different answers from different BK attorneys. One said we couldn't do a CH13 only a 7, the other said that we could strip the
3rd and do a 13. The other said that we can "cram down" the 3rd. Essentially, whatever value or equity there is for the 3rd mortagage becomes secured, the rest becomes unsecured. Not sure who to believe, and since we are in Ohio, I'm not sure what our district will do.

Ideally we would like to have the third converted to unseccured debt and lumped in with that group for a CH13 payment plan. If we can't, I am not sure what happens in this oddball situation. Could the bank with the third remain a secured crditor, and try to say they need to be paid in full over the 5 years of the plan? Doesn't seem to make sense in being feasible? I would rather do a 13 and make my best effort to pay what I can over five years than to file a 7 and walk away from all the debts. Just sits a little better with me. Any thoughts or ideas on what to do. Would love to hear from someone who has been through a similar situation. Thanks!

[SMinGA]

My understanding: in order to strip a 2nd or 3rd there must be NO equity in it. Meaning your house would need to be worth less than the combined value of 1st + 2nd.

Is your county auditor's value comparable to what the house would sell for? How recently was that valuation updated? You might want to try to get some sort of comparative market analysis (from a realtor) to see where you really stand.

If you cannot get the 3rd stripped, then you will ultimately probably need to walk away from the house...

[StartingOver08]

Here the tax values are higher than the actual home value. As previously posted, get an accurate CMA or BPO of your homes value using comparable sales within the last 90 days only.

You will then know if you can strip off the 3rd lien.

[highlife]

Unsecured portion of 3rd vs. stripdown

Sorry for the confusion with some terminology. After looking through my notes from the conversation with one of the attorneys, I am actually talking about having part of a 3rd mortgage become an unsecured debt vs. having it stripped off completely. I realize now that there is a big difference between the two items.

The equity that we would have left in our home (in a best case secanario) after thhe first and second are paid is probably around $20,000. What the attorney was talking about was having the portion of the third mortgage that there is no equity in the house for, treated as an unsecured debt in a chapter 13. With a 3rd of about $580K ,(it was collateral from a business loan) and only $20K tops avaialble for equity, he is suggesting that the balance, about $560k would get lumped in and paid with the unsecured creditors. It would not get stripped off like I previously asked/stated in error.

Please let me know if any one has ever dealt with or heard of this before. Because there is such a large third lien on the house from the business loans, there is no way that the house would ever be able to be sold to cover the note. If we filed a CH7 and used my exemption, we would probably keep the house and the bank would get nothing from it. One attorney felt that the BK court would feel that staying ina $300K house while filing a CH7 might be considered an abuse by the court.

He feels that the CH13, and making the majority of the third unsecured, but at least reciveing something would be viewed better by the court/judge. It seems like this would be a better deal for the bank, in that at least they are getting some payment as unsecured creditors over the five year period. I am just wondering if there is any precedence for this in BK court. Other than that, I don't seem to have any grasp on how the BK court would deal with this undersecured and very large 3rd mortgage? Let me know your thoughts on this one. Thanks.

[Brazzy]

Thats not really going to happen. For the most part, you can strip a lien if it is wholy unsecured. If there is any equity to cover it you cant strip it. Cramming a house down is not an option.