Can I strip 2nd, without other debt?

[Moneypenny]

I discharged ch7 a couple years ago and in a couple years or so my HELOC is coming due for 35K, with another portion of it converted to installments (another 35K). This is discharged debt, and also technically unsecured since I owe 215 on 1st and a market value of 200K at best. I have kept current on all mortgage loans before during and after ch7.

This is CA

When I look up ch13 eligibility, i just see i need to be 4 yrs out of ch7, and that for the strip my 1st must be underwater. I couldn't find more details.


That's it? What if I have some savings-- about 7k now? What if I make enough to pay my 2nd mortgage? Well, I can pay the 350 on the installment and the 120 on the interest only-- but I certainly can't pay the balloon coming up.

Can I still file even if I can afford to pay?

I don't have any credit card debt cause I haven't taken out any cards. I have no other debts, just want to strip the 2nd if I can, mostly because I cant make the balloon coming up. Would like to stay in house, or, have some way to get a new one soon. Rents are basically the same as my payments (well, not the balloon, but my current payments), so I don't get a windfall or savings for future house by stopping paying my mortgages.

Is ch13 a rational choice? It's just to strip the lien. Should I stop paying the 2nd?

[bcohen]

If the HELOC is underwater, you can stop paying it, let it charge off, and save up money for a settlement. Many people have reported being able to negotiate a settlement (lien release) in the 10% to 20% range when the loan is 100% unsecured by any equity. You don't need bankruptcy to do this.

[spidge]

If the HELOC is underwater, you can stop paying it, let it charge off, and save up money for a settlement. Many people have reported being able to negotiate a settlement (lien release) in the 10% to 20% range when the loan is 100% unsecured by any equity. You don't need bankruptcy to do this.

This is what I should have done, but I had not paid for two years. Give it a go and keep us posted in this thread.

[Moneypenny]

I was asking about doing a 13 and the basic rules of it, but hey, I am also up for advice about negotiating.

I could try that, but here's the problem: they dont settle with people who are current.

If I stop paying on 70K, and in a few years its 110K with penalties and interest, and I settle for 15% (who knows what the settlement situation will be in a few years, though). Then I pay 16500, and pay tax on 93500, at 32% that's 31K and change, so I pay 47,500 on 75K debt originally.

I will need the 31K tax money, just like I need the 35K balloon payment now, and then there's so much uncertainty and I haven't saved much.

Still want to know about chapter 13 though.

[davetedge]

Moneypenny, I think if you're insolvent at the time you settle, there is no tax implication.
I can't speak much about 13, but I read somewhere that you can file the 13 now and do a lien strip. You don't have to wait 4 years.

[HHM]

Moneypenny, I think if you're insolvent at the time you settle, there is no tax implication.
I can't speak much about 13, but I read somewhere that you can file the 13 now and do a lien strip. You don't have to wait 4 years.

There is a split of authority on whether you can do a lien strip in a non-dischargeable chapter 13. The direction seems to be moving toward the notion that you CAN, but not all districts agree. But even in those districts that allow it, you generally need to file the chapter 13 in good faith...which means, you need some reason other than stripping your 2nd mortgage for which you should file chapter 13. You will need to consult with a BK attorney in your area to find out if that district allows non-dischargeable, chapter 13 lien strips. With the good faith requirement, and no other debt, not sure you could do the 13 for the sole purpose of stripping the 2nd mortgage.

There shouldn't be any tax consequences in settling, mainly because of your prior BK discharge. Assuming the 2nd mortgage was included, it has been discharged, a subsequent settlement to deal with the lien does not create a tax bill.

[Moneypenny]

Ok that's great on the tax front: and I am not too worried about waiting another 2 years-- there is no hope of FC for BoA in that time frame, who owns the lien on the 2nd.

However, since the HELOC becomes due in full around that time, I assume this is not bad faith. They want 35K plus continuing payments on the other 35K chunk of the 2nd (some of the HELOC was converted to installment loan). I do not have 35K-- is that not the basic idea of bk, that you cannot pay back your debts?

I realize HMM was speaking on the topic of doing a quick ch20-like piggy back bk, not on waiting 4 years. But will this still be bad faith if I wait for the 4 year window, then file? (I realize also no one is talking about my actual moral bad faith, just legally, as after all I did not plan this at all)

My original question still stands as well-- about qualifying for ch13. My question is I do have some money now, and a stable job-- I just can't pay my balloon HELOC coming due. Can I still qualify for 13?

And one more concern is that our property values are rising: it is possible that my 2nd could come slightly, very very slightly into the money in two years. In that case, I could still get a debt repayment schedule set up through 13, right? I guess that means a min. of 3 years of my family having enough just to eat, sleep, and work for 3 years, right?