Not Your Typical Situation...need help!

[CJR]

Ok...I am new to all of this so please bare with me. We unfortunately had to close my small business late in 08' and as a result of a large commercial loan for start-up capital we filed Chapter 7 in August 09'. We received our discharge two weeks ago. The commercial loan was SBA backed and as collateral listed our home with a mortgage lien (we have been in default since Oct. 08'). We have a first and second, both were discharged in the BK, but we have been making payments in good faith. We have never been late for as long as we have had them. We are current on all bills/payments. This places the mortgage lien in 3rd position @ $550K. Our 1st is $172K and the second is $38K. The home would most likely appraise at $150K +/-, but we do want to keep it. My questions are: 1) Can 3rd position foreclose on a property when the value is only covered by the 1st, 2) How can I get the 3rd position stripped so I can keep my house, 3) Should i walk away, 4) Can my 1st mortgage get involved and help in any way. At this point, 3rd position has not made any moves, short of reminding my lawyers that they have the mortgage lien on the house. HELP!

[LimpDisc]

[CJR]

Thanks and I figured as much. I am hopefully looking for advice on the possibility, or legality, of getting a judge to strip the 3rd positions lien...I guess the supreme court is beginning to take a look at these situations. Knowing the house is upside down we still want to keep (neighborhood, neighbors, friends, affordable etc...) plus we do not want to wait 2+ years before being able to get another mortgage as we are not renters. Good luck with your discharge and the future!

[creditguy]

I agree with LimpDisc.

Are you consdering doing a Chapter 20 since you were just discharged in 7?

I think in this case you should stop paying, let them kick you out and find somewhere else to live.

[kw1025]

Third position cannot foreclose. It is all about the 1st. I have 3 underwater properties in Florida and i have gone thru this alot! The 3rd lein holder can do nothing until it is sold or foreclosed. They can only take their lein amount, and try to collect it from you

[kw1025]

Also, lein stripping is a process. It was cost you alot. A chap 11 would have done it.

[aljohnson007]

The 1st lien is superior to all others. It would be senseless for the 3rd to try and forclose as it would gain them zero. Sounds like bluffing a bit.

[CJR]

I thought a chapter 20 could only be done by filing 13 after filing 7 BUT before it is discharged (ours has been)? I know a 13 would strip both the 2nd and 3rd mortgages. Any other thoughts and thanks?

[biotechsolution]

You could file a Chapter 13 to strip the 2nd and 3rd mortgages.
But you'd have to wait until 4 years from your discharge date to
have the debt discharged and not be in a 100% payback plan.

[BnkrptcyLwyr]

FYI - Cannot do a Chapter 13. The underwater portion is unsecured debt for the purposes of determining eligibility under 11 USC 109(e) ... and easily exceeds the 330k+ limits.

[BnkrptcyLwyr]

You could file a Chapter 13 to strip the 2nd and 3rd mortgages.
But you'd have to wait until 4 years from your discharge date to
have the debt discharged and not be in a 100% payback plan.

Not true (at least not here in Michigan). I just won a case back in September which held that even though the Debtor was not eligible for a discharge, the lien could still be stripped (because a discharge is not necessary to strip a lien in a Chapter 13). This was in front of Judge Rhodes ... and if you know anything about him ... you know that the win was a great win.

So, you do not need to be eligible for a discharge, you can immediately turn around, file the Ch. 13, and still strip the second mortgage, even though you won't receive a discharge. Judge Rhodes ruled though that the lien would not be stripped until plan completion (but we sure didn't care about that ... because that was certainly a reasonable provision, and within the dictates of the bankruptcy code).