Chapter 13 Foreclosure

[Robinrader]

I am 39 months into my chapter 13 payment plan and it has been rough. It looks like 7 more payments and I am clear of all this or so I thought. When I filed Chapter 13, I told my attorney that I wanted my home included which he said it was. However the plan calls for the house payments to be made outside of the regular plan payment, which I was doing until I could not afford them. It has been two years now and it looks like BOA is finally going to foreclose. So during these past two years I have met with my attorney approximately 3 times to discuss the status of my home and inquiring if there is anything that we should be doing so my case wont be dismissed. I was told no just wait till the bank forecloses then we can modifiy the plan.

So I met with my attorney today and informed him that the trustee sale will take place in a couple of days what do we need to do since I am so close to the end. Well I saw a worried look on my attorneys face and he tells me that since my house payment was a secure debt being paid outside the plan then what ever deficiency is left after the forclosure is not dischargeable in my Ch13. Which obviously means tax liablity for me.

I cannot believe this is happening.

[ValleYum]

Wow, I can't offer any help to you but I wanted to say I am so sorry for you and your situation.

Best wishes to you.

[HHM]

First, check your statement of intention on your BK petition; what was the stated intent of the plan. You (your attorney) immediately needs to amend your petition and plan to surrender the house and amend the plan accordingly.

The attorney is correct, chapter 13's do not normally discharge mortgage debt if the property is being retained in the BK.

[despritfreya]

Please ask your attny why California's anti deficiency statute would not protect you. It is my understanding that the statute protects you from the foreclosing lender but, as I am not in California, I am not positive.

If you are not protected under State law (I can’t imagine that bk law can change the application of non bankruptcy law outside the context of the actual bk), and/or if there is a 2nd mortgage which you were going to continue to pay, I would agree with the attny. You need to modify the Plan (even this late in the game) to surrender the home. Take a look at 11 USC 1328(a)(1) and then 1322(b)(5) and you will understand the problem.

I cannot comment on any tax consequence.

Des.

[HHM]

Good catch Desp, OP is in CA and CA does have certain anti-deficiency rules. So, the entire issue is probably moot.

[Robinrader]

Thanks eveyone for the advise but I have one question doesnt the California anti-deficiency rules apply only to the states taxes and not the taxes the IRS would come for.