Can a lien strip be added to current BK 13

[stelladallas]

My plan has been confirmed for some time now and I am just hearing about 2nd lien stripping. I am not current on my second mortgage. I stopped paying when my first loan was eligible and received a HAMP modification. Hamp modifications entittled the 2nd mortgage for an MP2 loan modification that would mirror/model the HAMP modification. Wachovia bank rules didnt allow active customers in Bankruptcy to modify their loans. Now Wells fargo owns the loan and has made contact with me wanting to do an MP2 modification that would mirror the HAMP modification. My first mortgage is at 160K my second mortgage is 33K. My home is valued in Fort Myers Florida around 100K. Can my attorney this late in the game attempt to get a 2nd lien strip?

[HHM]

Not likely, generally, as part of the confirmation process, the lien strip must be done.

Also, the value of the house is established at the time of filing the BK. Subsequent decrease in value does not allow you to lien strip later on in the chapter 13.

[stelladallas]

At the time of filing the value was less. My attorney never mentioned lien stripping. I have an appointment with him tomorrow to discuss the 2nd lien. Both my 1st and 2nd lien along with my car are not being paid thru the plan. Does this help or has my lawyer sunk my ship?

[HHM]

Whether the payments are paid through the plan has nothing to do with it.

You may still be able to move for a lien strip, but as the rules have developed on this issue, generally, the lien strip must be done in order for the plan to be confirmed.

[HHM]

But, let's do some math, your FIRST mortgage is $160K, and your home is worth $100K, walk from the home, you are an idiot for staying...sorry for being blunt. Even if you could strip the 2nd mortgage, you house is still WAY upside down.

[stelladallas]

Idiot maybe for not being more educated than my lawyer. Moving is not an option at this time. My 2nd loan was written off according to my credit report and the lender. The lender states if I do not do the MP2 modification on the loan they could put a judgement on me. The lender on 2nd can not forclose at this. Both 1st and second are held by the same lender. Do you have any other advise/opinion other than walking away?

[HHM]

No, because the right choice is so obvious, there is nothing else to do, it is waste of time and money to strip the second.

The 2nd mortgage cannot get a judgment against you because of the BK, so you are okay there, so no point in modifying the 2nd. And because you are so upside down on the 1st, you are walking from the home at some point. Frankly any more money you spend on the first is a waste and good money after bad, the time it takes to do a foreclosure in FL, you could have 10's of thousands of dollars in the bank...that will allow you to move.

OPEN your mind to the possibilities.

[stelladallas]

Yes you are correct someday I may walk but a little advise from someone much wiser than myself in this area is greatly appreciated. After the BK is discharged June 2012 can the 2nd lien holder place judgement ? My first mortgage rate is at 1% for 5 years and my intention is to pay down the principle as quickly as possible.

[HHM]

One thing to consider, if you walk away in the future, that starts a NEW clock on credit rebuilding and the ability to buy another home. If you keep the house for 5 years, and then walk away and allow foreclosure, it will be another 3 years from then before you can buy again.

Bottom line, you need to talk to your lawyer, the "late filed" mortgage lien strip is very much a district by district issue, but the cases are leaning against you. Once you receive your discharge, there is NOTHING the 2nd mortgage can do against you.

Without more info, balance due on mortgage, current payment, hard to give a more complete analysis, but still, you should probably walk sooner rather than later.

[keepsmiling]

HHM, question:
If OP stops paying the mortgage, doesn't she suddenly have a bunch of disposable income to pay unsecured with? Is this any different than a car payment ending?
Also... if the attorney didn't suggest a lien strip back when the house was worth less, isn't that some kind of malpractice?

[stelladallas]

HHM remaining mortgage 159K at 1% for 5 years, the goes to 2% for 1 year, then 3% for 1 year, then 4% for one year , then goes to 5% and caps at 5$. monthly payment 825.

[despritfreya]

My spin on this.

1. The Order Confirming binds the creditor and the debtor to the terms and conditions stated therein. 11 USC 1327(a)

Can a Plan be modified to reduce what is paid to a creditor? Yes. 11 USC 1329(a). Will a Modified Plan along with a 506 adversary to strip the 2nd at this late date work? Maybe, maybe not. The worst thing that can happen is the creditor objects and, if you lose, you are back to what you have right not - at which point you could decide to walk. Therefore, I see no harm in trying.

2. Walking away when there is no equity. . . While I am all for this, walking away is not always the best course of action. Can you rent for less? Do you have small children you will be uprooting? What is the availability of satisfactory rentals in your area? How much "interest deduction" will you lose as it relates to taxes? (In OP's case the deduction has already been lost as there won't be much with a 1% interest rate.) Many factors must be weighed before walking. For me, personally, if I could rent for less, I’d live in the home as long as possible “rent free” until I was booted out and then move on.

3. Did OP's attny commit malpractice as asked by keepsmiling? Possibly. If the home was completely underwater when the case was filed and the possibility of a strip off was not discussed then, IMO, yes. Valuation is actually determined at the time of Confirmation but since that date fluctuates, attnys for debtors and creditors routinely agree to use the filing date to establish value but that is tempered by the obtaining of an appraisal prior to Confirmation or the filing of an AP to determine value.

Des.

[HHM]

2. Walking away when there is no equity. . . While I am all for this, walking away is not always the best course of action. Can you rent for less? Do you have small children you will be uprooting? What is the availability of satisfactory rentals in your area? How much "interest deduction" will you lose as it relates to taxes? (In OP's case the deduction has already been lost as there won't be much with a 1% interest rate.) Many factors must be weighed before walking. For me, personally, if I could rent for less, I’d live in the home as long as possible “rent free” until I was booted out and then move on.

I sort of have to disagree on this one, (1) uprooting kids, bogus argument, just an excuse, kids are very adaptable, the change is actually probably better for them, teaches them how to deal with adversity; (2) rentals, honestly, it is rare that renting would be more expensive, the people that say this just haven't looked hard enough and are trying to find an excuse not to do what they know they should. When you as underwater as the OP, you are essentially renting anyway; might as well make it a official and get yourself DEBT FREE. No matter how you slice it, a mortgage is a debt, and if the underlying securing assets is worth significantly less than is owed, it is as if you are paying down a credit card debt, it is wasted money.

All it is the basic, fear of change, and fear of unknown, that is the barrier to the right decision, nothing more.

To the OP, what is your gross monthly income?

The modification is fairly standard, that is not the issue, you are looking at the wrong end of the problem. It is like when car dealers talk to you in terms of monthly payment during car buying negotiations, they don't want you to recognize that you will be paying $40,000 for a $25,000 car if you accept the "affordable" payment. You are about 62% negative equity in your home, just on the 1st mortgage. You are trapped in that house, barring an significant appreciation in real estate prices (not likely in FL anytime soon), it will take you approximately17, that is SEVENTEEN years to just get to break even on the first mortgage.

[keepsmiling]

Again, because this comes up periodically and I am really curious:
If OP stops paying the mortgage, doesn't she suddenly have a bunch of disposable income to pay unsecured with? Is this any different than a car payment ending?

[HHM]

Again, because this comes up periodically and I am really curious:
If OP stops paying the mortgage, doesn't she suddenly have a bunch of disposable income to pay unsecured with? Is this any different than a car payment ending?

That is why I asked for the OP's gross income.

Generally, if a person can actually qualify for a modification, they usually qualify for chapter 7 and only did a 13 to save the house or for some other strategic reason.

However, to answer your question, no. You still get a housing allowance in chapter 13. However, if a person decides to walk away from a house midstream in chapter 13, they need to get back with their attorney and figure out the best way to get the bankruptcy discharge (1) e.g. continue with chapter 13 and modify the plan, or (2) convert to chapter 7 if eligible.