CH7 and Lien Stripping

[jupitert]

Good morning!

I live in Florida, and am in the process of filing a CH7. I own a home, and have a 1st mortgage(house worth less than 1st), and 2 HELOC's. My lawyer said the only way to strip the 2 Heloc's and keep the 1st is to file a CH13. And from what I have read here and other places, his statement is very true, without any blurry lines.

However, a friend of mine, who also lives in Florida, and owns a home with a 1st and 2nd mortgage, went to a BK lawyer who told him he could file a CH7, and pay her an extra $150 to file a "Motion to Dismiss Lien", and therefore would be able to strip his 2nd mortgage and keep his house and 1st mortgage.

Is this a possibility? I told him no way according to my research/lawyers advice.

Thanks!

[HHM]

Chapter 7 lien strips are pretty much dead in the water. There is one case out of New Jersey that allowed it, but it is still very much a minority view.
Plus, the attorney's terminology is all wrong (at least for BK purposes); there is no "Motion to Dismiss Lien" in bankruptcy.

[jupitert]

Thanks for the quick reply.

I was quoting from memory on the "motion...", so obv I misquoted. But i do recall the verbage to be something similar to what I quoted.

Another question:

Is the following scenario a possibility?

Can I file the CH7, include all 3 mortgages, and work out a ride through on the 1st? Or does the house have to foreclose to satisfy the 2 HELOC's?

[DebtEnder]

You could always try a settlement after BK to pay a portion of the 2nd and 3rds and have them release the lien. But there is nothing forcing them to do this.

Odds are decent you could just pay on the 1st and the others will sit on it for awhile and do nothing. But if the market goes back up and they have a piece they can chew on they may then come after the house. However for them it may be better to take %10-20 now rather then wait many years and then have to pay for a foreclosure and then hope to get a little more.

[CCsAreEvil]

Can I file the CH7, include all 3 mortgages, and work out a ride through on the 1st? Or does the house have to foreclose to satisfy the 2 HELOC's?

There is nothing to do to "work out a ride through" except just keep making your mortgage payments on your 1st (keeping current but do NOT sign any reaff agreements). You would probably stop making payments on your 2nd and 3rd. In my case, I recently stopped making payments on my 2nd (a HELOC).

As stated many times here, the 2nd and 3rd will probably only force a foreclosure if there is money to be made (business decision) for them (the 2nd and 3rd). This is after their legal fees to process the foreclosure. I have no idea exactly how much it would cost those banks, but people have thrown numbers around like 30k or 40k? If that's the case, why would they pay for the foreclosure process? The 1st must be 100% satisfied before any proceeds go to the 2nd or 3rd. Of course, there's a possibility that the 1st may be willing to give a small percentage to the 2nd/3rd. But is that likely? Who knows.

[jupitert]

I suppose what I meant by "work out" is the following:

When I file a 7, and include all 3 mortgages, I am no longer obligated to pay the lien holders. I understand that there is a good chance that #2 and #3 wont foreclose due to monetary logic, so lets focus on #1 lien holder.

I owe them $164k, house prob worth at auction $140-$150 at best. If I continue to not pay them, eventually the will foreclose. But if I called them up and said, "I know you have a legal right to foreclose, but if I pay you the agreed to original payment, will you not foreclose until I stop paying, or until you think the house is worth more than what I owe". I was wondering if anyone has done this, if this is even legally possible?

I was thinking that because I include the house in the BK, that I had no options when it comes to continue to living in the house, except for - stay until they kick you out.

[iv65536]

Me? I've stopped paying the 2nd, and will wait for the market to start to recover before I pull the plug on the 1st, which is an interest-only (for another 6 years) 5-1 ARM. I think the 2nd will realize that if the valuation is going up, I may just let the 1st foreclose, in all likelihood leaving them with nothing.

Pardon the pokerese, but the key is knowing exactly when to muck your cards.

I just wonder if the 2nd realizes I've stacked the deck, and was completely within my rights to do so. If they realize that, they will simply take what I offer them.