Stripping 2nd Mortgage in Chapter 7?

[IBroke]

Specialized Loan Servicing SLS but I'm not sure who the actual investor is. Mines 177k...you got me beat lol

We got our 2nd Mortgage with them as well - $150K, currently 100% unsecured and no payments made for more than 2 years. We wanted to make a deal with them but they didn't want to.

We will ask our 1st Mortgage company now if they might be able to purchase this loan for pennies on the $ and work that into our new mortgage we will probably get after we made our third trial-payment. They might know better ways to contact and deal with SLS than we do.

I assume the 1st Mortgage company won't be opposed to being the only mortgage holder on that property, right?

In addition, our 1st Mortgage company offered us a contract adjustment after the 3rd payment that would let us safe the house from foreclosure. Promising that might be difficult with a second mortgage...

[albacore44]

Heres a question I dont think has been asked. I'm planning on filing in a few months hoping for a CH-7. I have stopped paying all CC's, but am paying 1st and HELOC up to date + car payments. If I could do a lein strip I will, but not sure how much lower houses will go. Owe $240K on the Heloc. If I stopped paying it now, and assuming Heloc don't forclose, which i don't think they would, assuming the house is underwater about $200K, would it mess up my chances for a Ch-7 ??

Plan was to hope for a Lein strip, if not do a Ch-7, and stop paying HELOC after discharge, and roll the dice that they don't forclose, but sell to a JDB, then I would attempt to settle with the JDB to remove the lein.

[IBroke]

Heres a question I dont think has been asked. I'm planning on filing in a few months hoping for a CH-7. I have stopped paying all CC's, but am paying 1st and HELOC up to date + car payments. If I could do a lein strip I will, but not sure how much lower houses will go. Owe $240K on the Heloc. If I stopped paying it now, and assuming Heloc don't forclose, which i don't think they would, assuming the house is underwater about $200K, would it mess up my chances for a Ch-7 ??

Plan was to hope for a Lein strip, if not do a Ch-7, and stop paying HELOC after discharge, and roll the dice that they don't forclose, but sell to a JDB, then I would attempt to settle with the JDB to remove the lein.

As noted before, there is no "official" stripping in a Chapter 7. You would have to negotiate that with the lender. So far and based on the current laws, stripping is only available in Chapter 13.

If you're going for a CH7, you could stop the HELOC-payments. However, putting a huge amount of cash aside PRIOR filing for CH7 for a post BK HELOC-settlement is not a good idea - at least not if that amount exceeds your exemptions. That would be money burned. I'd rather pay it to the HELOC than give it to the trustee (and CC companies).

I would suggest you stop making payments AFTER your discharge and put that money aside for a settlement. If you save the entire money for that purpose, you are on the safe side - even if they DON'T settle.

[Overmylimit]

IBroke


Thats the sad part is this is there job to know all these things, I can't stand when I call about all possibilities with the mortgage and they go duh>>> I don't know. The guy today was a senior officer too, he just finally said he would note the account of our conversation.

You mentioned you had them as well, how did you get the 2nd unsecured? was it stripped or was it never attached to your mortgage?

[chad9162]

IBroke


Thats the sad part is this is there job to know all these things, I can't stand when I call about all possibilities with the mortgage and they go duh>>> I don't know. The guy today was a senior officer too, he just finally said he would note the account of our conversation.

You mentioned you had them as well, how did you get the 2nd unsecured? was it stripped or was it never attached to your mortgage?

I think he means the 2nd is metaphorically "unsecured" because he has no equity....at least thats what I read.

[IBroke]

IBroke


Thats the sad part is this is there job to know all these things, I can't stand when I call about all possibilities with the mortgage and they go duh>>> I don't know. The guy today was a senior officer too, he just finally said he would note the account of our conversation.

You mentioned you had them as well, how did you get the 2nd unsecured? was it stripped or was it never attached to your mortgage?

The problem is that we STILL have our 2nd Mortgage with them - although, to be honest, I don't know exactly WHO is handling our 2nd Mortgage.

[IBroke]

I think he means the 2nd is metaphorically "unsecured" because he has no equity....at least thats what I read.

Yes, that's how it is..

[chad9162]

Nor is the proposal overly aggressive. I am waiting for my discharge in Chapter 7, before which I modified the terms of my 1st mortgage, and cut a repayment deal with my HELOC lender (who, because of the timing of filing, is actually my 2nd mortgagor); I also have a 3rd mortgage that is completely unsecured due to the massive drop in our home's value in the last 2 years ($1.1. to current appraised value of $740,000). I stopped paying the 3rd, and have been trying to cut a deal with them since February, but they are retarded and keep shuffling me from person to person, and haven't ever gotten back to me on my loan modification proposal. I'm trying to buy them out of their $230,000 for ten cents on the dollar, but if they don't accept then I plan to file a follow-on Chapter 13 case and strip their lien entirely. There is recent case law out there that lets you file essentially a no-asset Chapter 13 case -- in which the creditors will get nothing -- in order to lien strip. Filing a Chapter 7 then a 13 is commonly called a Chapter 20, and is done in good faith when you couldn't fit into Chapter 13 because of the size of your unsecured debt; the "good faith" argument is that individual debtors should not have to file much more expensive and time consuming Chapter 11 cases.

As far as issuance of the 1099 goes, whether the bank issues it or not is immaterial, as your personal liability --- including tax liability on the deficiency -- is extinguished in the bankruptcy. If the issue arises, all you have to do is tell the IRS you filed bankruptcy on the debt, and that will take care of it. The 1099 is only issued because of "forgiveness" of debt by the bank; once you file, the debt is not forgiven, but expunged.

This idea sounds interesting but wouldn't you be in Bk for 5 year under Chap 13? I'm thinking it might be easier to just wait 2-3 years and then walk away and buy something different. I could probably do a 0% Chap 13 but 5 years seems like an eternity....

[chad9162]

We got our 2nd Mortgage with them as well - $150K, currently 100% unsecured and no payments made for more than 2 years.

WOW 2 years!!!! That's before the mortgage melt down and they haven't done anything!? COOL!

[chad9162]

Remember, they 'loss mitigation' people are really just collections agents working for the OC. They have a script and most of them have no idea about how foreclosures work.

Its frustrating to deal with someone what does not understand that the second can not 'jump over the first' to get equity that is not there!!! LOL

Problem was you are telling them the facts and that part is not in their script!

This guy is smart. Obviously there are department that collect and others that recover (what ever they can). Until you get to the department that only cares about recovering "any" asset you'll be talking to a wall.......

[IBroke]

WOW 2 years!!!! That's before the mortgage melt down and they haven't done anything!? COOL!

Well, in our area, the meltdown started at that time. I bought an investment property right at the peak (if only I knew..) and that went into foreclosure.

BTW, we couldn't pay our 1st either - they just received the first payment ($900 less than under the original contract - they offered a modification) 3 weeks ago. So we "saved" $3500 (1st) + $1200 (2nd) for more than 24 months. Not that we are proud of it - but without a job, we are at least thankful for this 2nd chance.

Sounds crazy, but I guess the fact that we maxed out our entire home equity might have saved us from foreclosure. Our home has a current value of about $350K - so nobody was in a hurry to foreclose - at least not with a $550K 1st Mortgage AND a $150K 2nd.

[hamletsdead]

This idea sounds interesting but wouldn't you be in Bk for 5 year under Chap 13? I'm thinking it might be easier to just wait 2-3 years and then walk away and buy something different. I could probably do a 0% Chap 13 but 5 years seems like an eternity....

Yes, you're right, the 5 years part is a bit aggravating, particularly since if I end up with a big salary jump and the mortgagor found out about it they could petition the court to have me pay them on the unsecured debt -- the same debt for which I have no personal liability due to my Chap. 7 discharge! I think as a practical matter, however, that since the lien is stripped immediately after the lien removal hearing, if your worksheet shows negative income but you offer to fund the plan -- say $30,000 to pay off all unsecured debt, paid immediately instead of over 5 years, it should be a done deal and you just have to wait an additional period of time (4 years after Chapter 7) to get a discharge. It's a little tricky, I agree. I'd much rather just settle with them, and not have to file BK serially.

[chad9162]

Yes, you're right, the 5 years part is a bit aggravating, particularly since if I end up with a big salary jump and the mortgagor found out about it they could petition the court to have me pay them on the unsecured debt -- the same debt for which I have no personal liability due to my Chap. 7 discharge! I think as a practical matter, however, that since the lien is stripped immediately after the lien removal hearing, if your worksheet shows negative income but you offer to fund the plan -- say $30,000 to pay off all unsecured debt, paid immediately instead of over 5 years, it should be a done deal and you just have to wait an additional period of time (4 years after Chapter 7) to get a discharge. It's a little tricky, I agree. I'd much rather just settle with them, and not have to file BK serially.

Your plan sounds complex. If you discharge all your unsecured debt in Chap 7 why would it be brought up in a Chap 13? I don't think a mortgage company would care (definitely wouldn't spend the money) to force you into paying debt that isn't theirs.

If this is the case then Chap 7 didn't really accomplish anything (maybe I missing something). Also I don't know if paying your "unsecured" debt in one lump sum would work either because...

1. I don't think you'd be able to exempt $30,000 in your BK estate. Wouldn't the trustee come after that money? That's a huge finder's fee for them.

2. I've read that paying your Chap 13 off early is very difficult. That technically extra funds are "supposed" to be used to pay your debts. Most people recommend sticking to the payment plan and not divulge you are making more money.

Lots of variables here....but very interesting. Personally I'm going for Chap 7, will try to negotiate with Navy on my 2nd but you know how they are. If they don't negotiate oh well! I'll treat the house like a rental and after a few years move. Hopefully I would have re-establish enough credit to buy something else.

[spidge]

Heres a question I dont think has been asked. I'm planning on filing in a few months hoping for a CH-7. I have stopped paying all CC's, but am paying 1st and HELOC up to date + car payments. If I could do a lein strip I will, but not sure how much lower houses will go. Owe $240K on the Heloc. If I stopped paying it now, and assuming Heloc don't forclose, which i don't think they would, assuming the house is underwater about $200K, would it mess up my chances for a Ch-7 ??

Plan was to hope for a Lein strip, if not do a Ch-7, and stop paying HELOC after discharge, and roll the dice that they don't forclose, but sell to a JDB, then I would attempt to settle with the JDB to remove the lein.

My understanding is that when you file a ch 7 you cannot be more than 2 months behind on your home loans.

I am no pro as I come here for advice and guideance to, so this may be a trash in trash out discussion.

[chad9162]

My understanding is that when you file a ch 7 you cannot be more than 2 months behind on your home loans. I am no pro as I come here for advice and guideance to, so this may be a trash in trash out discussion.

Not entirely correct. According to my attorney (maybe district specific) you only need to be current on the mortgage that secures your property. So if you have no equity, which would make the 2nd and/or 3rd mortgages technically unsecured they're not going to foreclose on you.

If they do they still have to pay off 1st Mortgage, which means they'd lose more $$ that their original loan amount. Being current has nothing to do with the BK courts from my understanding. Its up to the lenders/creditors of your mortgage to determine if they're going to foreclose.

Like others have said, foreclosure laws don't change just because you file BK. The other lien holders have to figure out if its worth it to foreclose.

I don't think there is a magic number like 2 months....