Filed Ch 13, Upcoming CH 7, what to do about 2nd Mort??

[needtomoveon]

Hi,

I filed Ch13 last year as my husband was laid off for 15months and had high credit cards, 2nd Mort. was not stripped, I owe $215,000 on 1st Mort., $90,000 on 2nd Mort, house was evaluated last year at $265,000-$275,000, BK Atty. said we couldn't strip it. I was approved for a loan mod on 1st last month, hadn't paid on 2nd in 8 months, just found out is was charged off in July. Just spoke to BK atty abount 2nd he states that we would have to reopen a Chapter 13 to get 2nd stripped, but doesn't think it would happen due to house evaluation? But we are under water??BK Lawyer suggest's that I file CH 7 to get rid of the monthly Trustee payment of $261 and work out something with 2nd. The 2nd is $775 a month and I can't afford it, they are willing to work out a lower payment, I mentioned settlement, they said they would only settle for 75,000!! I have a meeting of creditors on 12/6 for Chapter 7 any suggestions is greatly appreciated!!

[biotechsolution]

You can't strip a a 2nd mortgage in a 13 because you're house would have to be worth less than the first mortgage (215K). If you're house is really worth 265-275K and you only owe 210K on the first then your 2nd could very easily foreclose because it would be worth it form them.
You're best bet might be just filing the 7 if are elgible, discharge all your debt but the house. Start paying on your loan mod for the 1st and work something out with the 2nd.
The problem is since you do have equity in the house they will get something if they foreclose, you need to offer them something comparable.

[tcreegan]

Hi needtomoveon,

I mentioned settlement, they said they would only settle for 75,000!! In a business negotiation, rule is to start high....

You have somewhere around 60K in equity after the first, cost of sale, no buyers in the local market = low auction price, .... the 2nd could get their hands on 45K, maybe more, maybe less.

hadn't paid on 2nd in 8 months, just found out is was charged off in July hmmm....sounds like they are not interested in going after you, and in todays real estate market probably not surprising... they can just let the lien sit there until you/1st lender/someone goes to sell or transfer the property or a miracle rebound in housing prices makes it worthwhile to foreclose. Charging it off is just internal accounting, probably has some tax benefits for them...

If you discharge the 2nd in the Ch 7, they might be more willing to negotiate with you...or might not....

A third option is to not reaffirm either 1st or 2nd, stay in the house until evicted on the dawn of foreclosure sale, and bank the mortgage payments you aren't making. Given the time it takes to foreclose, you could rack up some big $$ ...

Just some thoughts, might be helpful, might just be random nonsense...

Tom in Colo

[needtomoveon]

My house was evaluated for $265,000 in August of 2009, the market around me has gone way down since then, I think it's worth about $240,000 now. My balance with 1st is $235,000 now with the new mod. If I get a free market analysis and it's only worth $240 do you think I coud strip the 2nd (Balance $97,000) in Ch 13 or do they only look at the previous balance 1st Mgt.($215,000) before the mod. I thought you couldn't strip 2nd in a Ch.7, that's why I'm nervous about going forward with the Chapter7, and maybe leaning towards opening up the CH 13 again to strip the 2nd.

[biotechsolution]

you can't strip in a chapter 7, only in a chapter 13 and only if the value of the home is less than the 1st mortgage.

[momofthree]

You couldn't even strip it in a ch.13 because the value is still above the 1st mortgage balance. If the 2nd mortgage has even $1 of security, then it cannot be stripped. It's an all-or-nothing situation, unfortunately.

[tcreegan]

Hi again needtomoveon,

You don't strip a 2nd in Ch 7, but you can settle, and possibly for pennies on the dollar is there is no equity from the 1st to cover the 2nd. Usually you wait until after discharge and a few months of no payments, then approach the 2nd lender with an offer.

...strip a 2nd in a 13 but settle a 2nd in a 7...sounds like 'new math'

Tom in Colo