Trustee moved to dismiss..............

[slydog1967]

Trustee moved to dismiss because I contribute 300 a month to my 401k and have a 200 a month 401k loan repayment, they said that with that I should have $431 to put in a repayment plan for a 13. My lawyer says that in a 13 you can claim those and then that would take away our ability to repay. So I do not know what is going to happen, has anyone else run into this? Also if the 7 trustee sets a dollar amount that he thinks we should be able to repay like the 431 he states in his move to dismiss can we just use that figure for our 13? Any input would be appreciated.

[needafreshstart]

From what an attorney told me you can contribute a little to 401K, but if it was an excessive amount they would probably object. The trustee is probably thinking paying yourself $500 a month and not trying to pay creditors anything, isn't acceptable.

[HHM]

I agree, $500 a month to 401K in a chapter 7 is probably excessive and that is why the trustee is objecting. Also, you are in that catch-22 area. In a 13, you can make 401K loan repayments, but in a chapter 7, many districts still hold that such loan repayments are luxuries in that the 401K is not a true debt (because you are borrowing your own money).

The defense to the motion may be that, creditors would not get anything in a chapter 13, because the objectionable amount would not be considered disposable income. Thus, from an equitable standpoint, creditors are not worse off by you filing a chapter 7 than filing a chapter 13 (assuming the numbers really work out in your favor).

[hrh25]

I also have a question to this regard, my income is high as compared to the medium income for Virginia (I would say $50,000 over). I talked a few lawyers and one of the lawyers that has done the most bankruptcy cases in Northern Virginia tells me that the trustee could force me into a chapter 13 even though there really isn't any disposable income according the means test that he did. Also, he mentioned that the court can sell my house even though its under both mine and my wifes name and am the only one filing. There is no equity in the house infact if they try to sell with all the costs i think they would be negative $100,000. This attorny is telling me that they do this because the mortgage payments are high and my debt is also high and after selling the house they can use the new disposable income to pay off the credit card debt.

Has anyone every gone thru this? Can they really force you into a plan they know will not work because the income is just not there or force you to sell your house thats under both (husband and wifes) name because the mortgage payments in there opnion are high?

Thanks again for your help.

regards

HRH

[FreshLikeADaisy]

I'll let someone else answer about the trustees, but don't discount the possibility that the attorney himself was trying to encourage you into a 13 despite your ability to pay: he makes a good deal more money that way.

There are several people here who obtained 7s even though their numbers originally created "the presumption of abuse" on the means test. Just because you're over the line doesn't mean it's impossible to get a 7, just harder. If none of the other attorneys you spoke with seemed too concerned, and felt confident you could get a 7, it may well be this guy was bending the facts to "encourage" you into a 13 for profit.

P.S. I would also add that "has done the most bankruptcies in northern VA" says "bankruptcy mill" to me. Nothing against them, they help a lot of people, but their bread and butter is a standard no hassle bankruptcy, especially Chapter 13s. File the forms and drive through to the next window, please.

[hrh25]

[HHM]

I'd ask for clarification on the lien stripping. Section 1322(b)(2) is fairly explicit

The chapter 13 plan may...Modify the rigts of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's primary residence...

From what I have seen, you cannot lien strip voluntary liens (i.e. 2nd mortgages) from your primary residence in a chapter 13.

Lien stripping in bankruptcy
Liens can be stripped off of the debtor's assets in Chapter 11 or Chapter 13 when there is not enough equity in the asset, after deducting senior liens from the property's current market value, to secure the unsecured in whole or in part, where the lien exceeds the value of the debtor's property.

Section 506 of the Bankruptcy Code acknowledges that a lien is only a secured claim to the extent there is value in the asset to which it attaches. To the extent that the claim exceeds the value of the collateral, that portion of the claim is unsecured.

In Chapter 11 or Chapter 13, even voluntary liens, such as mortgages and security interests, can be stripped down to the value of the collateral, with the exception of voluntary liens secured only by the debtor's residence.

http://www.moranlaw.net/lienstripping.htm

[hrh25]

I guess am confused now, i emailed another attorney and he also says that,

"Obviously you have done a lot of preparation on this. Yes, it is
possible that you can strip off the 2nd mortgage"

HHM, am a little confused how would you define "voluntary liens".

I am trying to understand this section as this is my primary residence and the section says, "In Chapter 11 or Chapter 13, even voluntary liens, such as mortgages and security interests, can be stripped down to the value of the collateral, with the exception of voluntary liens secured only by the debtor's residence"

Thanks again for your help.

regards

HRH

[HHM]

Rest assured, that any mortgage is a voluntary liens. (involuntary liens are things like Mechanics Liens, Judgment Liens etc).
A voluntary lien is lien placed on property with consent of or at the request of the property's owner, or as a result of a voluntary act by the owner. Mortgages and trust deeds are examples of voluntary liens.

The courts are split on the issue lien stripping. Perhaps in your jurisdiction, the Circuit Court has held that under-secured mortgages can be striped.
They take a somewhat roundabout reasoning and debtor friendly approach, and say that under-secured mortgages can be stripped, because there is no value securing the lien, so the subordinate liens are technically no longer secured.

If you have multiple attorney's telling you this, then it is probably true of your district.

In any event, the purpose of my post is to give you some insight so you can ask some questions of the attorney's you are interviewing.

[hrh25]

HHM,

Thank you so much for your reply, you have been a great help. I am in Northern Virginia so am not sure but as you mentioned if i have a few attorneys telling me that this is the case then just maybe its true. The second one only replied to my question about it that yes its possible and felt that i had done alot of preparation on this. I hope he just did not agree because he thought maybe i knew something he didn't

You have been a great help and i will see what he sayd when i point the section you mentioned and see if indeed it can be done in Northern Virginia.

Thanks again

Regards

HRH

[HHM]

The real challenge in the lien stripping cases (in the areas where it is allowed) is getting an accurate valuation of the house.

[hrh25]

I just emailed two different atorneys that said yes its possible to do mortgage stirpping. I had the section that you had mentioned and asked if he infact had done any and he replied that he done about 30 or 40 of them between 97 and 98 but none any in recent years and that most people he would mention this to did not want to keep the first because they could not offord it anyway. I am waiting to here back from the other see what he says.

Thanks again for your adive HHM, this would be huge help if indeed it is possible.

regards

HRH

[hrh25]

HHM, i am assuming that in this case you would need a real full blown appraisal? Would the court appoint someone to do the appraisal or would you just hire someone yourself?

Thanks again

HRH

[HHM]

The need for an appraisal would arise if the Bank holding the 2nd mortgage wanted to challenge the lien strip. Thus, an adversarial proceeding would be initiated and each side would present their evidence at a hearing before the BK judge. Thus, you would need to go out and get your own appraisal.

[rrockinggramma]

It is called a Pond Motion. And yes it can be done in certain districts. Yours must be one of those