CH 13 Lien Strip on 2nd Mortgage--sell house

[suzychapstic]

Hello,
I am 55 months into my 60 month CH 13 plan. We did a 2nd lien strip on our primary residence, which I know is not effective until I finish my plan and receive a discharge. My plan this whole time was to sell my house after my BK discharge, and get a fresh new start in something cheaper. A real estate agent that I contacted said she is seeing a lot of people who had a BK and then when they go to sell, the lender (of the 2nd) wants money. She was not sure of the details of their bankruptcy cases........

BUT, she got me all worried.

I interpreted that after I receive my discharge, I will take my discharge papers to the county clerk, who will remove the lien for the 2nd, and then (because I am not in CH 13 anymore) without trustee permission, I am able to sell my house and the 2nd Mortgage had been converted to unsecured debt, and essentially would be gone. I would only have to pay off my first mortgage with the proceeds from the house, and any profit would be mine to keep.

Can someone please confirm that I have this right? If I am incorrect, it will surely mess up a very well planned out plan and reason why I filed initially. Also, how soon after plan completion and discharge is ok to sell? I would like to do it as soon as possible to get out of a very high mortgage payment.

Thanks in advance,

[spidge]

You are correct in that the completed and discharged ch13 will remove the 2nd. The agent has likely come across many ch7 filers who think since they are not obligated to pay the debt on the second assumed the lien was also removed. If I did not have a second to strip I would have done the 7.

Selling won't be an issue once the lien is removed, but will you need a mortgage on the less expensive home? If so be sure to check out what you may qualify for as many programs make you wait 2 years after discharge. I think there is an FHA program that allows for no wait time, but you will need to be discharged and have a solid payment history for a solid year.

[LadyInTheRed]

The agent has likely come across many ch7 filers who think since they are not obligated to pay the debt on the second assumed the lien was also removed.

My thought exactly.

[suzychapstic]

Thank you Lady in Red and Spidge. What would you say would be the timeline for selling after my plan is complete??? I would like to do it as soon as I can. Would I be able to list it but not close until discharge received? Or should I wait till discharge papers are in hand, have the lien removed, and then list the house? Would there be any time period I would have to wait after discharge for any reason?

[suzychapstic]

In addition, I do not plan to become a "Home Moaner" any time in the near future. It has just been too challenging to have the resources to pay for the house and the upkeep. I need to simplify, downsize, and live below my means. So, I am not worried about qualifying for a mortgage right away.

[justbroke]

In order for the lien strip to stick, you must wait for the discharge. Additionally, some people have had "minor" correctable issues with the 2nd (junior) lienholder not "recognizing" the lien strip for one reason or another. This may cause some back and forth with you mailing the discharge and the copy of the lien strip order. Some banks are pretty good and issue the Release of Mortgage shortly -- don't ask me what shortly means -- after the bank receives the discharge order. The Release of Mortgage could take weeks.

If you hold a "recordable" lien stripping order, then you are in the best position. You would be able to file that order to release the mortgage. I can't tell if hold such an order; your attorney is the best person to tell you whether it's a recordable stripping order.