? regarding HELOC and investment property

[123ABC]

My cousin is getting a divorce. They had purchased a piece of property, about 5 acres of land, using a HELOC. He transferred the piece of property to his dad since techinically there is no lien on the property, and now has filed a CH7 BK and is trying to get the HELOC stripped. Is this possible? What should she do? Thanks.

[SMinGA]

Sorry, no. Lien strips only happen in a ch. 13, and only when the mortgage owed on the 1st is beyond the value in the home. (Makes the 2nd/HELOC fully unsecured.)

AS to the transfer of the property to his father - that could be another issue depending on when it happened. Your friend should discuss that aspect with his atty asap.

[123ABC]

Actually you are incorrect. I stripped my HELOC in my CH 7 just last year...

[SMinGA]

Are you sure you don't mean that you discharged it? Not the same as stripping the lien.

Actually you are incorrect. I stripped my HELOC in my CH 7 just last year...

[123ABC]

Im not sure of the term for it. I had a HELOC. I no longer do. The only lien on my property is the primary mortgage.

[SMinGA]

Did you settle it after the bankruptcy?

If not, were papers filed in the bankruptcy to remove the lien? I'm only asking because its generally part of ch. 13 and not 7. A 7 can discharge the debt, but the security interest normally still remains. Some people then settle w/ the 2nd for 5-15% of the balance to get them to release the lien.

[123ABC]

Nope I did not pay them a dime.

[SMinGA]

Was an adversarial proceeding held, as part of your bankruptcy, to remove the lien?

If not, what basis are you using to determine you no longer have a junior lien? Or did you stop paying, and assume they released the lien?

Nope I did not pay them a dime.

[123ABC]

Look Im not an idiot ok... Trust me the lien is gone, as are all the other liens I had for CC debt and other things. That is the reason I filed BK in the first place. Regardless my question is not in reference to my situation. Im all good. My question is in regard to my cousin and her husband and thier situation.

Is it legal for him to transfer a property free and clear and then try to the the HELOC he used to purchase the property discharged. He is doing some really shady things (her husband) and my cousin does not want to get screwed out of the equity in property that she has a right to in the divorce. Thanks.

[SMinGA]

If the transfer of property was done in an attempt to hide assets from the BK court, and he did not get fair market value for it: the trustee can void the transfer and sieze the property to sell to repay creditors. Trying to strip the Heloc when its not attached to that piece of property would be a separate matter, not connected to the transfer of property ownership.

I was asking about your claim to have stripped the lien in a ch. 7 because its not generally done, but then there are some things district specific. If a district allows it in a 7, that is useful info for people to know. If you're confusing the lien strip with the discharge of debt however - they are 2 different matters.

[kw1025]

When was the transfer done, and when was the Bk filed. If it is close, that looks fishy

[tcreegan]

mess

Hello 123ABC,

I think your cousin has a big mess on her hands. A good attorney is going to be worth the money.

Transfers of assets w/in a year of BK filing are considered fishy and get a BK trustee's attention. Transfer to a family member is guaranteed to get investigated. The trustee will probably pull the property back into the BK estate.

Your cousin probably needs to file an AP, a claim, or objection in the case to get her share of the property protected. It will make a difference if she lives in a community property state or not. I think this will quickly get beyond the amateur stage and a good lawyer will be needed.

Hope she gets it all sorted out,

Tom in Colo

ps: As to your property, I agree with SMinGa, the HELOC debt gets discharged in a Ch7 (you don't have to pay a dime) but the lien survives the BK. If you have already checked with the county clerks office or the title company, my apologies. But if you are just assuming that it is gone b/c you no longer have to pay or deal with it, you might be in for a rude surprise when it comes time to transfer the title. Have to ask for forgiveness in advance, 99% of folks assume the lien is gone, only 1% have actually checked into it. If you are in the 1%, my apologies and good for you!