Can my 2nd mortgage be unsecured??

[JPOP1]

This is one of the things I'm currently trying to figure out.
Here is my scenario; I own a Home that I owe approximately 170,000 on. My tax value, which I just received in the mail, is also around 170,000. I had a CMA done by my realtor a month ago and she thought that I could get around 184,000 for it. But she stated that our area of N.C. is still real slow and that on average homes set on the market for 6 months. So I would say for a quick sale I would be looking at around a 170,000 which leaves me with no equity. EVEN IF it sold for 184K I still have a NC state exemption of 18,500for each debtor, each debtor means a total of 37K in exemption, right? So if this is accurate then I could claim the 2nd mortgage I have, that I owe 635.00 a month on at a balance of 48K, as unsecured debt. Does this sound right to you guys?? Man this would make me HAPPY.
It seems that I have also heard that if there was any equity in the home at all then I had to pay back the 2nd mortgage 100%.
So many questions, my head is spinning!

[SinkingFast]

Just wanted to let you know I moved your thread here, JP.

It's not really relevant to the Exemptions Section. That's the area for what people can claim by State. And that's not really what you're asking about.

I understand what you're asking and I don't think that the 2nd could actually be an Unsecured.

In order to sell the house, you'd have to be able to deliver to the buyer a clean title. With the 2nd being listed on your Deed/Title, you couldn't tender a Clean Title until after you filed BK and discharged the debt of the 2nd.

A Title Company and the Buyer's Lender is not gonna close the deal on your house until you can deliver a clear and free Title.

Now if you could get the primary mortgage to allow you to Short Sale enough lower that you could clear the 2nd in the Sale, you might be able to pull together a deal to sell your house.

[macsen]

I'd say unfortunately you won't be able to sell the home and then discharge your second as unsecured. We filed last month and intially were hopiing to be able to sell our home. Basically our attorney told us that it's just as Sinking Fast stated, your second has a secured claim on the home and MUST be paid in order to sell the home. Here's what's happening in our case and maybe is the reason you heard about discharging a second.

We're surrendering our house in the bankruptcy. Basically what will happen is a foreclosure sale/auction. The first mortgage holder will have primarly claim on the funds garnered from this sale. Any *Excess* could be claimed by the second mortgage holder and I doubt in my area there will be much excess. Colorado has the highest foreclosure rate in the nation currently! Anyhow, after the sale, the second mortgage holder is sitting in the cold with no cash and no property to assert a claim on. NOW, *they* can file as an unsecured creditor since there is no longer a house to file claim against and hope to receive something from the bankruptcy trustee. Hope that answer wasn't as jumbled as I think it sounds!

[JPOP1]

I'm sorry for not making this clear in my original post but I do not want to sale my home. I want to keep it and was hoping that I could some how make the 2nd mortgage unsecured so I wouldnt have to pay the 635.00 a month payment. In my original post I was just trying to set and example of what the home would be worth "IF" it were to be sold vs.what I actually owe. Just to show that I dont actually have any equity. I was thinking that If I dont have any equity then I could get out by only have to pay my 1st mortgage.
I'm still looking at this point in filling a ch.13.

[lrprn]

I'm sorry for not making this clear in my original post but I do not want to sale my home. I want to keep it and was hoping that I could some how make the 2nd mortgage unsecured so I wouldnt have to pay the 635.00 a month payment. In my original post I was just trying to set and example of what the home would be worth "IF" it were to be sold vs.what I actually owe. Just to show that I dont actually have any equity. I was thinking that If I dont have any equity then I could get out by only have to pay my 1st mortgage.
I'm still looking at this point in filling a ch.13.

JPOP, since you signed the loan forms for your second mortgage making it a secured asset, frankly I don't see how it can ever become an unsecured asset unless the bank or mortgage company agrees that the loan is no longer attached to your home. Why would your lender ever agree to do that? Your home is their ace-in-the-hole to getting their money back if you default on the payments or declare bankruptcy (which you are thinking of doing).

If it was possible to make a second mortgage unsecured and then declare bankruptcy to get rid of it, all of us in Ch 13s with second mortgages would be doing it with the help of our lawyers. None of us are doing it because it isn't possible to do. Sorry to be so blunt....time to turn your attention to how you are going to handle your second mortgage payment if you file Ch 13.

[SinkingFast]

There has been discussion on your question.

http://www.moranlaw.net/lienstripping.htmhttp://www.moranlaw.net/limitations.htm


Voluntary liens are mortgages, deeds of trust, and home equity lines; involuntary liens are judgment liens and tax liens.

Limitations on lien stripping

The Bankruptcy Code prohibits the stripping of voluntary liens secured only by the debtor's residence. Thus under- secured mortgages on the debtor's home cannot be reduced to the present value of the property as can liens on some vehicles, etc.

The circuit courts of appeal are split on whether a voluntary lien on the debtor's residence that is not secured by any value (that is, the senior liens equal or exceed the value of the property) can be stripped.

In the 9th Circuit, which includes California, liens can be stripped if there is no value securing the mortgage sought to be stripped.


Whether or not your 2nd mortgage can be stripped and counted as Unsecured will really depend on how your particular Circuit views this situation. Not sure if the 910 day rule of possession applies here or not.

You need to ask an attny in your area this question to see how this would be handled where you live.

[SinkingFast]

I found a website that discusses, in detail, the 9th Circuit Court case:

http://www.weil.com/wgm/pages/Contro...ptcy&f=a200408

Scroll down the page to the Lien Stripping article.

I did note that this is from 2004 so it may not have basis or merit since the BK reform of 2005.

[JPOP1]

Thanks SinkingFast for that info. I'm going to try and make this a simple question. Since it doesnt seem possible to strip the 2nd mortage that I have I need to find away to pay them both plus the other secured credit I have. Can I be forced to sale or forclose on my home If I dont have any money left over each month after paying my secured credits plus my living expenses? I figure I currently owe around $4k a month to secured credit and living expenses. This 4k includes my first mortgage payment of $1,335 and a 2nd mortage payment of $635. Total = $1,970 a month. My wife and I currently have a net income each month of around $3,900. We are trying to lower some of the living expense items so that we at least equal what we owe vs.what we make each month. We are current on both 1st and 2nd mortgages and there is no equity in my home. So again, the question is can I be forced to sale my home or forclose under these circumstances? I'm in my mid 30's and I could really see myself living in this home for a long time to come so I dont want to have to give it up if I'm not forced to. I know most people on this site would recommend letting it go.