Valuation of First Mortgage When Lien Stripping Second Mortgage

[easymoney]

Hi everyone,

I am looking to do a lien strip on a second mortgage under a CH 13 plan and was wondering how the value of the first mortgage is calculated.

For example, if the unpaid principal balance on the first mortgage is $300,000 and the unpaid monthly mortgage payments and late fees total an additional $15,000, would the valuation of the first mortgage (for lien stripping purposes of the second mortgage) be $315,000 or $300,000?

I believe it would be $315,000, but was not 100% sure so I thought I would ask.

Thank you.

Easymoney

[LadyInTheRed]

It sounds like you have it right.

[revitup]

Another lien stripping question concerning valuation of the house which as I understand it has to be appraised below the senior lien in order to remove other liens. We are close to parity $ 100 k eachway, but there are two unpermitted additions to my property constructed by my exhusband that my re broker said would have to be removed when he was trying to short sale the property, I have a contractprs estimate of around $30k for the removal of extension room, shed, and other essential repairs. What I need to know is will the appraiser and ultimately the court allow this deduction from the face value. I don't feel like shelling out $500 for an appraisal when I can't get a straight answer from local appraisers.

[revitup]

Reply to forum invitation to return to this site:

Yes I would really appreciate genuine help and advice from others in similar situations Ie converting from ch 7 to ch 13. Unfortunately most of the response came from pompous pricks who are either attorneys or wannabe attorneys. They indicate they know what to do but offer little or no functional help. I thought the legal profession was educated to a higher level than the average person but when I hear them say "you should see an attorney" I wonder if they realize that most "honest" bankruptcies are filed by people who cannot afford the $3000 these vultures charge

[justbroke]

As a non-attorney who has filed Chapter 13 and even converted to Chapter 7 and was discharged, a Chapter 13 case is nothing to sneeze at. Hopefully your local court has some sort of Pro Bono clinic where you can get help with your plan or reorganization and help with your lien strip. Many Districts now have a "model plan" which helps immensely when it comes to getting a Pro Se debtor's plan confirmed!

The removal of the non-permitted structures is irrelevant. The question is: what would a reasonable person, given the age, condition, and market, pay for that home. You find the answer to this question through an appraisal.

As for lien stripping, the key word here is evidence. You need to present evidence of value. If you just guess or attach an unsubstantiated print from a Web site (which is not evidence), then lender "may" say that the evidence is wrong and then present their BPO (broker price opinion). Their BPO would have more evidentiary value. If you want to stop that whole evidence and haggling over value, you get a full residential appraisal by a certified appraiser for your State. Most residential appraisals (in most States) are less than $300 for a property under $500K (and many will even do them for $250 if you ask).

If your values are really close (within $10K), you really need best evidence. Short of sworn testimony at trial by an admitted expert, the certified residential appraisal by a state-licensed appraiser, will be best evidence of value.

Again, you could just use tax records, Zillow, other on-line sources, but their evidentiary value "could" be questioned. Then you may need to get an expert to testify or obtain a "real" appraisal. (You might even be able to present evidentiary value by obtaining a competitive market analysis (CMA) from a local realtor.)

[LadyInTheRed]

Reply to forum invitation to return to this site:

Yes I would really appreciate genuine help and advice from others in similar situations Ie converting from ch 7 to ch 13. Unfortunately most of the response came from pompous pricks who are either attorneys or wannabe attorneys. They indicate they know what to do but offer little or no functional help. I thought the legal profession was educated to a higher level than the average person but when I hear them say "you should see an attorney" I wonder if they realize that most "honest" bankruptcies are filed by people who cannot afford the $3000 these vultures charge

Actually, very few of BKforum members are attorneys. Most are people who have gone through or are going through BK who are trying to help others going through the same thing. Many of us got so much from this forum, that we stay around to give back to people who are where we once were. The attorneys who do post are very generous to do so and give very good advice. Even an attorney cannot give you complete and adequate advice on an internet forum. Trying to do so would be irresponsible. This forum is to give you general information on bankruptcy. It is not a substitute for legal advice from an attorney who can get detailed information on your situation and give you very specific advice based on the details of your situation, the laws of your state and knowledge of how the local trustees and judges react to certain kinds of situations. Many prose filers have received a lot of help here. But, when we read a post by somebody who appears to be over their head, we provide whatever information we can and suggest they consult an attorney. You have been told to see an attorney because you filed Chap 7 without a complete understanding of how BK can best help you accomplish the goal of keeping your home when you are in the midst of an appeal of a foreclosure case. Two members of the forum, one an experienced BK attorney who posts here anonymously out of a true desire to help people and one a very knowledgeable member who filed a Chap 13 pro se and converted to a Chap 7, got a discharge and stays current on developments in BK law, did their best to help you. If these are the "pompous pricks" you are talking about, you are way off base! JB even took the time to help after your very insulting post. JB is a better person than I, because I can't let your comments go without a response.

As far as attorney fees are concerned, I paid my BK attorney $5,300 for a Chap 13 with a lien strip. Actually, I paid $1,000 before filing and the rest was included in my plan. He did the vast majority of the work up front and then got paid over 4 years. I was very happy when his fee was finally paid in full. He took a risk that I would not complete my plan and he would not get paid at all. If I lost my job, let my case get dismissed and then later filed a Chap 7, the unpaid portion of his fee would have been discharged. Most of what went to my attorney would have gone to my unsecured creditors if it didn't go to him. $5,300 is a small price to pay to receive a discharge of over $100,000 in debt, including my second mortgage. Thanks to my experienced and knowledgeable attorney, my plan was easily confirmed as originally submitted. I look forward to receiving a discharge by this time next year. As somebody you may call a wannabe attorney (I am a paralegal in another area of law who am proud of reviews by the partners I work with that say I do attorney-level work), I probably could have managed to file a Chap 13 on my own. But, I chose to put my case in the hands of a knowledgeable professional. It was money well spent!

Despite what the credit industry who pushed to get the 2005 bankruptcy reform act passed want people to believe, most bankruptcies are "honest bankruptcies". People manage to raise the money to pay attorney fees all the time! $3,000 is not out of the standard range for a BK, especially if you are trying to keep a home that is the subject of a foreclosure appeal). Do you really mean to say that people who pay their attorneys $3,000 are not filing honest BKs? If you can't afford to pay an attorney to help save your home, maybe you should consider the possibility that you can't afford to keep your home.

Do you have any idea what kind of overhead an attorney has? First, law school is not cheap and is a very difficult three years. Malpractice insurance alone is a huge expense, even for experienced attorneys who have never been sued for malpractice or had a complaint filed with the State Bar. Then they have to keep their offices running by paying rent, staff salaries and benefits and many other expenses. In comparison to what I've seen estate planning attorneys, corporate attorneys and litigation attorneys charge, bankruptcy attorneys are inexpensive. Yes, there are vultures out there and I have read some horror stories about incompetent BK attorneys. But, you can say the same about any profession. I think most consumer BK attorneys choose this area of law because they truly want to help people who are in financial trouble. If you truly encountered a vulture, then you should consult with more attorneys. But, don't expect them to work for free or for less than their services are worth.

If you don't think you are getting genuine and helpful advice here, go somewhere else. None of us want to waste our time trying to help someone who doesn't appreciate it. As for getting advice from somebody who has converted from a Chap 7 to a 13, you need to realize that that is a small subset of people who filed BK. While many BKforum members have converted from a Chap 7 to a 13, not all of them continue to post after they are discharged. Most move on with their lives and put their BK behind them. When you post on bkforum, you are going to get the best efforts from people who post out of a genuine desire to help. We get nothing out of it except the satisfaction of helping people and a heartfelt "thank you" here and there. This forum is not a substitute for legal advice. Our help can only go so far. If you are going to proceed pro-se, you need to take what help you can get from where you can get it and then do your own research using the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, your bankruptcy court's local rules, case law when necessary and secondary legal sources (practice guides and other publications you can find in a law library). It's not easy to be your own lawyer. You would be smart not to alienate people who are willing to help when they can.