Interest accruing

[flashoflight]

Michigan is a non-judicial state. The statue of limitations (and the ch7) bars the lender from suing you. But the non-judicial foreclosure can still proceed. In California, the lender can wait 60 years after the record date of the Deed of Trust. Unless you have a viable case challenging the verbiage in the Deed of Trust or the NOD/NOS was done improperly, or that the current lender isn't the lender, you won't be able to stop the foreclosure with a lawsuit.

[justbroke]

flashoflight just to clarify what you wrote... it stops the lender from suing the debtor "in personam" (personally). It doesn't stop the lender from foreclosing to recover their money.

I do not like the non-judicial States where a Deed of Trust is issued. I had one in North Carolina and the foreclosures in a non-judicial State can be done quickly! In Florida, a judicial State with Deed of Mortgage, it can take years to foreclose (if challenged).

[cookiemom]

Can a bk7 case be reopened to adjust the collateral value that is listed on Petition (July 2008) to submit the actual appraisal value conducted(may 2008) which would then place 2nd mortgage wholly unsecured allowing to strip off lien completely since bk7 was prior to 2015.

[despritfreya]

Can a bk7 case be reopened to adjust the collateral value that is listed on Petition (July 2008) to submit the actual appraisal value conducted(may 2008) which would then place 2nd mortgage wholly unsecured allowing to strip off lien completely since bk7 was prior to 2015.

You can try but you will not succeed.

I am sure that you know that in 2015, the USSC held that debtors in Chapter 7 bankruptcies cannot void or “strip off” wholly unsecured junior mortgages. (See Bank of America, N.A. v. Caulkett, 575 U.S. 790 (2015).) Unless a debtor was in the 11th Circuit, Caulkett had little impact, since most Circuits, including the 6th, previously held that mortgage strip-offs in chapter 7 were not possible, based on Dewsnup v. Timm, 502 U.S. 410 (1992).

Michigan is in the 6th circuit so here is your answer which confirms the comment above:

In re Talbert, 344 F.3d 555 (6th Cir. 2003)

This bankruptcy appeal presents purely a legal question that has split the bankruptcy and federal district courts, namely, whether a debtor who has filed for Chapter 7 bankruptcy may avoid a valueless lien under § 506(d) of the Bankruptcy Code, 11 U.S.C. § 506(d). Because the Supreme Court's reasoning in Dewsnup v. Timm, 502 U.S. 410 (1992), applies with equal force and logic to the issue at hand, we hold that a Chapter 7 debtor may not use § 506 to "strip off" an allowed junior lien where the senior lien exceeds the fair market value of the real property in question.

Des.

[justbroke]

Can a bk7 case be reopened to adjust the collateral value that is listed on Petition (July 2008) to submit the actual appraisal value conducted(may 2008) which would then place 2nd mortgage wholly unsecured allowing to strip off lien completely since bk7 was prior to 2015.

Just adding that I think this is a non-starter. I don't think any court would allow you to reopen a bankruptcy case to adjust what you placed on the schedules, other than maybe adding a missed creditor.

(Even with a missed creditor, most jurisdictions say that the Chapter 7 discharged all debt that arose prior to the filing of the case, so re-opening to add is moot. There is an exception when it is an asset case, but that still doesn't get the case re-opened as the non-scheduled debt would be simply non-dischargeable anyhow since the creditor didn't receive the benefit of a distribution.)

[cookiemom]

Just thinking out loud...I don't the lay of the land. I just feel that what they are attempting to do is terrible. I'm not trying to get anything free or cheat the system. I'm hard working Mom that everything I have I worked for. I'm not rich, but I'm finally comfortable. What they are taking or attempting is a LOT of $. The value of house is not just based on the market, its also based off of what I've paid down on the 1st and updates I've done. I have read some rulings that the valuation of collateral can be held at petition date not current post petition date.

[justbroke]

I think I can say this for everyone, that we understand completely. The issue is that bankruptcy doesn't operate the way that we wished it would operate. The purpose of bankruptcy is not to provide a windfall or a "head start" to debtors, but to provide them a reasonably fresh start. The rule with liens will always be the rule with liens; all liens survive bankruptcy. The downside of that rule is that when it's a property lien secured by real estate, the value of that lien can actually appreciate (grow).

I was lucky. My lender gave up on my second and without even asking, sent me a satisfaction of lien, filed it with the appropriate governmental entity, and sent me a 1099-A/C. Others that went through this in 2008-2012 either knew of the strategy or somehow learned of the strategy. By strategy I mean a strategic (or non-strategic) foreclosure in order to negotiate on the second mortgage. Back then, during the housing crisis, it was common to see a settlement for 10% of the value. There was no guarantee that one could settle the second lien, but discharging personal responsibility during the housing crisis certainly gave both parties incentive.

A smart creditor, that didn't get money from TARP, would do just what your creditor did... sit on their lien and wait. (By "smart creditor" I mean one that could ride out the housing crisis and be able to gain over time.) Some of these "smart" creditors, as I call them, are or were actually junk debt buyers (JDBs) that specifically bought this type of debt often for pennies on the dollar (less than $0.10/dollar).

I have read some rulings that the valuation of collateral can be held at petition date not current post petition date.

That's for a valuation hearing in a bankruptcy. For a refresher, valuation is either what you have on your schedules or what is determined in a valuation hearing (as of the date of the hearing, not the filing date).

Unfortunately, you cannot go back and value the collateral since your bankruptcy has closed. As despritfreya wrote, your value was established by your schedules at the time you filed (unless you had a valuation hearing to determine that value). Your case is closed and you cannot go back in time.

* TARP = Troubled Asset Relief Program created to ease the housing crisis burden by buying "toxic" mortgage securities from the market.

[despritfreya]

cookiemom

No one here is judging you and we all support your efforts if those efforts have a legal basis. The problem is a Chapter 7 was never, ever, the type of bankruptcy that would impact a residential mortgage. That is not what Chapter 7 is for. If, at the time you filed bankruptcy, there was absolutely no equity in the home after consideration of the first mortgage and you wanted to get rid of the 2nd, you needed to file Chapter 13. (Please don't ask about reopening the 7 and converting to a 13 - again, no legal basis to do so coming on 14 years after the fact.)

Outside of the context of a properly filed bankruptcy with proper "facts" I see no legal basis to wipe out the second lien. I am always open to proper legal argument telling me that I am wrong so, what does the attorney you hired say?

Des.

[bcohen]

cookiemomIf, at the time you filed bankruptcy, there was absolutely no equity in the home after consideration of the first mortgage and you wanted to get rid of the 2nd, you needed to file Chapter 13. (Please don't ask about reopening the 7 and converting to a 13 - again, no legal basis to do so coming on 14 years after the fact.)

Obviously, attempting to reopen the 14 year old Chapter 7 is a non-starter. However, if the current creditor is demanding an amount which is not supported by the value of the house today--taking into account what it would realistically sell for at auction, plus the cost of foreclosure, she can file a new Chapter 13 bankruptcy and let the judge decide how much equity exists and what the terms of repayment shall be. Depending on how aggressive the creditor is behaving, filing for Chapter 13 bankruptcy could be a good option to save the house and pay as little as possible to clear this debt.

[justbroke]

bcohen that's exactly what des suggested... filing a (new) Chapter 13 (without going into the specifics).

Specifically, if cookiemom were to try to strip the second in a Chapter 13, it's not going to work. The reason is that the value of the home is likely higher than the value of the first mortgage. For what it's worth, lien stripping does not look at all at the cost of sale (whether it's a fire sale, cost to sell, commissions, or any other cost). The value would be set by an appraisal of its value without such consideration. So long as $1 of equity exists on the junior lien, there is nothing you could do because lien stripping would be unavailable in a Chapter 13.

Maybe the local bankruptcy district has a Chapter 13 loan modification program. It would be interesting when it comes to a second mortgage.

[despritfreya]

No. . . In no way will a Chapter 13 today (or any day) work if there is even 1 penny of equity over the amount owed to the senior lienholder. The anti modification provisions of 11 USC 1322(b)(2) forbids modifying a mortgage that is solely secured by a debtor's principal residence. And. . . attempting to change the status of the property from residence to investment in order to get around this is bankruptcy fraud.

My comment directed at Cookiemom,regarding opening the old case, relates to a post that I read on another forum.

Des.

[cookiemom]

Sorry..just trying to not let a bank take 100k from a 42k loan that I have done my due diligence to reaffirm.

[cookiemom]

I am really trying to take the high road in this, I just can't can't see the value in paying that much now for my house. They are seeking every penny of equity. And by equity takes into consideration what I've paid into 1st and improvements. F'ing foreclose then...if that my option. I'm a single mom working from home with a toddler not wanting to uproot her from her home but at that cost I could find a home with way less updates needed. I'm just shooting for something...something here to fight them on

[bcohen]

No. . . In no way will a Chapter 13 today (or any day) work if there is even 1 penny of equity over the amount owed to the senior lienholder. The anti modification provisions of 11 USC 1322(b)(2) forbids modifying a mortgage that is solely secured by a debtor's principal residence.

I am aware of what the law says, however could it not be argued that the loan is only secured by the equity which exists at the time of filing for Chapter 13 bankruptcy, and not in the entire amount of the (alleged) debt, which might be much higher? A $250k debt secured by a $120k house is not worth $250k, even if the house is owned free and clear. Similarly, in the context of Chapter 13 bankruptcy, doesn't the creditor have to provide proof of their claim, or are you suggesting that whatever payoff amount is demanded will be taken at face value--regardless of whatever documentation the current creditor may or may not possess as to how they arrived at this amount?

[cookiemom]

Bankruptcy courts have utilized various approaches in resolving this issue.
Some courts, a seeming majority, have held that the petition date is the correct date for
valuation, while a few others have held that the confirmation date is the correct date. Compare
TD Bank, N.A. v. Landry (In re Landry), 479 B.R. 1, 7 (D. Mass. 2012) (concluding that the petition date is the proper date for valuation) with In re Williams, 480 B.R. 813, 817 (Bankr. E.D. Tenn. 2012) (concluding that the confirmation date is the proper date for valuation). Courts utilizing the petition date also vary in deciding whether to make the rule a bright line test applicable in all future cases, or to adopt a flexible approach based on certain equitable factors. Compare Hegeduis, 525 B.R. at 84-86 (holding that test is the date of filing of the petition date with adjustments to be made based on weight of evidence) with In re Cooper, 11-02804-8-JNC, 2016 WL 3344839, at *5 (Bankr. E.D. N.C. June 8, 2016) (applying a flexible approach requiring courts to consider several equitable factors). See also In re Fuqua, 12-52348, 2015 WL 5678361, at *4 (Bankr. E.D. Mich. June 10, 2015) (creating a rebuttable presumption that the petition date is the proper date of valuation, which the non-moving party can overcome by persuading the court to apply a different date based on equitable factors such as the debtor converting the case multiple times). For the reasons below, the Court determines the date of valuation in this case is the petition date, August 30, 2014.