2nd Mortgage Voided??

[dbbw115]

Think I am having nervous breakdown, think I am going to lose my home. Laid off for 6 months, by the time I went back to work in serious debt, met with recommended attorney. Plan was to file Chapter 7. At the 1st meeting, the Trustee did not receive the schedules and & papers needed. Supposedly Lawyers office filed electronically. 2nd meeting - normal questioning began about bills and mortgage. In that questioning was asked about obtaining the 2nd mortgage and just a general question of did I go and sign the papers at the bank. Long story short, no I didn't. The loan is with a large bank & was applied for via internet, approved and papers sent thru the mail. Trustee stopped meeting and wanted more info on 2nd mortgage. Since the 2nd loan papers were not signed in the presence of a Notary although Notary signed at later date, and I did not provide ID, etc. Trustee said the Bank illegally gave me this 2nd mortgage and he is working to have it voided. Which now that would mean there is almost enough equity in the home for a "quick sale" etc. to pay off creditors. Giving up my home, was not my intention - I've love my home and am raising my family in this home we have been here 14 years. Are we going to get kicked out? My attorney keeps sayng "you are not going to lose your house"; but I am not confident in them anymore as there have been a few mistakes they have made with regards to papers being sent etc. Now I rec'd papers from the court a few days ago, that said there is a motion to extend the deadline for this case until the middle of 2010. I am so sick over this I can't concentrate, I can't eat, I can't sleep. I want to just pull out of this entire thing and try to work with creditors on my own. But it's too late. What does all this mean? Any answers would be appreciated.

[IBroke]

In what state are you living? I'm asking because that's very important. In FL, for example, it doesn't matter how much equity you have - if it's homestead, the equity is "BK-safe"...

[dbbw115]

New Jersey

[justplaintired]

If your attorney doesn't feel you will lose your house, then ask him why he says that. Your state doesn't have a homestead exemption of some sort? I found this on the net. Hope this will ease your mind somewhat. Do you have an appraisal of your property? Might be a good idea if you don't yet.

http://www.njlawconnect.com/newjerseybankruptcy.chapter7.faq.htm#10

12. Can I keep my home and personal property?
Residents of New Jersey can choose between New Jersey state law exemptions and federal law exemptions. Since New Jersey does not recognize a homestead exemption, New Jersey debtors can select the federal bankruptcy homestead exemption providing for up to $20,200 for the debtor's principal residence. When calculating your equity you should use a value that is based upon a fair market valuation. Once you determine this value, subtract the amount owed plus selling and transfer costs from the value to calculate the equity.

[dbbw115]

The attorney said if the Trustee voids the mortgage - instead of a Chapter 7 we will file a Chapter 13. I am so confused at this point I don't know if I am coming or going.

[IBroke]

New Jersey

That's too bad...

NJ has no homestead exemption so the lousy federal exemption of $20,200 applies. Do you think you have more equity in your home after deducting the first mortgage balance? I would give it a try and get an appraisal. Home values are VERY low (and even lower than you might think) right now..

[IBroke]

The attorney said if the Trustee voids the mortgage - instead of a Chapter 7 we will file a Chapter 13. I am so confused at this point I don't know if I am coming or going.

I assume this should avoid liquidation of the property by paying the liquidation-amount to your other creditors through the plan. Not as comfy as a CH7 but if it safes the house, it might be worth it.

[dbbw115]

We had a Fair Market Value done when we started this process, requested by the Attorney. The value fell approximately $60,000. Between the 1st & 2nd mortgage balances that only left $20,000 in equity. Now, if they void the 2nd there is about $50,00 to $60,000 - which is exactly the amount due to creditors.

[eddiep]

Actually your lawyer is right. In chapter 13 it does not matter how much equity you have, your home is safe from liquidation. The trustee may actually be doing you a favor. The trustee is probably not doing this out of the goodness of his heart, he is most likely trying to force you into a chapter 13. If he is successful in voiding your 2nd it will free up that much money to pay to unsecured for 3 years if you are under median and 5 years if you are over median.

How much is your second mortgage? How much equity would you have if it were stripped?

Stay on top of things since your lawyer has messed up other things with your filing. This could be a long term benefit to you. Keep us posted, very interesting twist.

[justplaintired]

If the second mortgage is void, and you don't have to repay it, then will you be able to meet your other bills? Is it possible this could be a blessing? I wish our second was void! We might have been ok if it was, well probably not with the cc debt. Too bad cc debt can't be voided.

Anyway, maybe this could work out to be a blessing? Sounds like a large sum of money on the second, so, if you have to do a 13 would it be about what the second mortgage payment is?

[dbbw115]

The equity would total around $50,000 - $60,000 if the 2nd mortgage was voided. I will do whatever is necessary just so I don't lose my home. It's just the worrying and stress is making me physically sick.

[IBroke]

Anyway, maybe this could work out to be a blessing? Sounds like a large sum of money on the second, so, if you have to do a 13 would it be about what the second mortgage payment is?

Good question - the trustee would be happy - that's for sure...

[dbbw115]

Total debt is about the same as the equity $50,000 to $60,000. That's what I was thinking without that 2nd mortgage payment, I can then afford to pay some creditors (not at the interest rates they were charging me though). So yes, I can look at it as a blessing as long as they don't try and sell the property. But the deadline being extended 10 months from now? When I can rest assured?

[eddiep]

If you are married you can double the federal homestead exemption so, $40400 if you are married.

[IBroke]

Total debt is about the same as the equity $50,000 to $60,000. That's what I was thinking without that 2nd mortgage payment, I can then afford to pay some creditors (not at the interest rates they were charging me though). So yes, I can look at it as a blessing as long as they don't try and sell the property. But the deadline being extended 10 months from now? When I can rest assured?

Too bad you already filed..but if you are married, it doesn't look that bad any more. And you might still hire an appraiser who might be able to come up with a lower value..You would be surprised how different appraisals on the same property can be..