Ch13 & Lien Strip situation?

[duumy]

Hello, First post but have been reading here (different user id, its ok I can be a little paranoid) for a while trying to figure out what to do?

Wife and I lost our jobs nearly 2 years ago 1 month apart from each other, have been able to sustain for that amount of time. Several months ago we stopped paying the CC's, August stopped paying the 2nd, current on the first. We owe 415,000 on the first, 280,000 on second and alot on the cc's. We contacted a realtor who is an "area specialist" in our sub-division and he came back with a CMA saying to sell he would price between 385,000-395,000 and that would probably sell. I now have a job offer but no start date, and my wife just started a job last week (both got offers at the end of the year Yah!) We quailify for 7 but we would like to stay in the house? We are willing to walk, but... 1st and 2nd are both BofA, the biggest question is should we file 13 and see what they do regarding the second? File 7 and try to then negotiate with 2nd for a buyout? Negotiate a buyout with 2nd then file 7? How does that work for people? Do you negotiate a buyout before filing or after? pro's / cons?

Thank You!

[Pandora]

Hi and welcome to the forums

Congrats on you both finding jobs, thats quite the relief I'm sure. Deciding what chapter to file depends on a few things really: income, asset protection, equity...etc. You can still keep your house if you file a CH. 7, however eventually you will have to settle with the 2nd to clear the lien else they can foreclose down the line - big concern. Issue becomes do you have the money to settle for anywhere between 5-20% to do so.

To strip the 2nd, you need to be 100% positive your house appraises at less than whats owed to the 1st; a CMA isnt in stone so if you go this route, ask your lawyer what the Trustee accepts as value. Certified Appraisals are the golden ticket and trump both CMA's and BPO's, cost is anywhere between $250-$400 depending on where you are (we paid $400 I believe for our cert. appraisal). The next thing you need to consider is can you afford the house payment long term along with what you'll be paying in your Ch. 13 payment plan, also taking into consideration that your 2nd mortg. payment wont count towards your bills, but will count as $ available to pay creditors. Stripping the 2nd means it will be treated like an unsecured debt.

Its best to consult with a lawyer to go over every aspect in filing each Chapter; doing the schedules will tell you quite a bit as to what your DMI would be.

Good luck to you!

[duumy]

Thank you Pandora for the reply,

I think the lawyer suggestion is the best idea, we have to do that anyway. I know we can't afford to come up with $50k to buy off the second but I am a little worried that they would not be willing to negotiate with us??? I have been unwanting to talk with them since its only been a 4/5 months and I have been planning on 13 and a lien strip for a while now? Maybe thats a good question also; How do you go about contacting the 2nd mortgage holder to negotiate? Whats the appraoch or do you let them approach you? Do you just tell them you are thinking about filing BK and see where it goes? Could this tip them off and now your in for a fight? Reason being I am not sure I would get a Certified Appraisal for the amount I am looking for, it would be close either way. Trying to be smart about this and not be attached, thats the hard part... being smart

[Pandora]

You can call your 2nd mortgage company directly - thats not a problem, however if you dont have the $ to settle the debt, the point in moot. As far as mentioning filing BK - dont. They hear that every day from people, and it means nothing unless you have a case number to provide to them.

To strip the 2nd, you have to see what your trustee will accept for value of your home. Some accept CMA's and BPO's whereas others will only accept a certified appraisal. For a ball park figure - look at your county tax records and see what the county assesses your property at; some do Fair Market Value 100% every year (our county does) and some do every other year and different percentages. Our home was valued by the county $6K more than what the appraisal came in at, so it was right on target as the assessment was done 6 months earlier than the appraisal. To strip a 2nd, depending on your district, its either done by motion or by an AP - but it will be in addition to your filing, giving you 2 case numbers - but they coincide with one another. The value of your home must be less than what is owed to the 1st in order to strip it, if its even $1 more, you cant do it. Normally the 2nd will contest the value and provide their own CMA / BPO on the home, which in most cases, is in their favor (higher than the 1st). This is why you have to trump it and thats what a certified appraisal does. Usually a lawyer that is experienced with lien stripping can give you a suggestion for a real estate appraiser in your area.

Since you've stopped paying your bills (minus the 1st mortgage), you should be able to use that money towards an appraisal on your home. If however, even with stopping payments to creditors, you still do not have enough money to live on with just your 1st mortgage, then you need to seriously consider starting over and letting the house go.

Consult with an attorney (actually, several), writing down all concerns and see what they say regarding your situation. One thing to certainly ask is if the AP is included in the cost for filing CH 13 - as well as if any violations come about by creditors, is there additional fees to file suit. Honestly you really wont know what your payment would be in a Ch. 13 until you fill out the schedules and see what your DMI is.

You're in for a train ride thats for sure - but know that it does get better I cannot believe in 6 weeks it will be 1 year we've been in our Ch. 13 plan! It goes by pretty fast - or at least I think so.

[momofthree]

Just wanted to mention that tax assessments are useless as value indicators here in CA since they go off the purchase price and just add 2% each year rather than reassessing each year.

I'm in eastern dist. of CA and the lien strip is done by motion here...

[duumy]

Hi and thank you to both of you for your responses, I know I am in for a ride.

Anyone know of an appraiser that feals sorry for broke people?