Reopen chapter 7

[cookiemom]

Can I Re-open my Chapter 7 discharge under under 530(b) to address a heloc that was not reaffirmed? Seek oversight from judge of what they are allowed to claim, back date the fair market value from when BK was filed in 2008, not today's market.

any supporting cases?

Section 350(b) of the US Bankruptcy Code can potentially stop a foreclosure by allowing a closed bankruptcy case to be reopened, which then triggers an "automatic stay" that temporarily halts foreclosure proceedings, if the court deems it appropriate to do so based on the circumstances; however, it's crucial to act quickly and consult a legal professional as the effectiveness depends on the specific details of the situation and when the case is reopened relative to the foreclosure process. This allows a bankruptcy court to reopen a closed case under certain circumstances, which could include a debtor wanting to reaffirm a debt at the time of discharge, but only at the fair market value of the secured property at the time of the bankruptcy petition filing; essentially allowing them to "re-enter" the case to formally reaffirm a debt on specific terms, usually to keep valuable collateral like a car or house.
Reopening a closed case:
This section enables a court to reopen a closed bankruptcy case to address issues that may have been missed or to allow further actions, like reaffirming a debt, if necessary.

Fair market value at petition filing:
When reaffirming a secured debt under Section 350(b), the value of the collateral is typically considered at the time the bankruptcy petition was filed, not the current market value.

Court discretion:
The court has discretion to decide whether to reopen a case under Section 350(b) and will consider factors like the reason for reopening and whether any parties would be prejudiced.

Good faith requirement:
To successfully reaffirm a debt under Section 350(b), the debtor must act in good faith and demonstrate a clear understanding of the terms of the reaffirmation agreement.
when reaffirming a secured debt under Section 350(b), the value of the collateral is generally considered at the time the bankruptcy petition was filed, not the current market value; this means the valuation is based on the "petition date" value, not the "present" value.

Explanation:

• Purpose of valuation:

The primary reason for using the petition date value is to ensure fairness and consistency in the bankruptcy process, as it provides a fixed point in time for determining the secured creditor's claim against the collateral.

• Impact on reaffirmation:

If the value of the collateral has increased significantly since the petition date, the debtor may be able to negotiate a better deal with the creditor when reaffirming the debt, as the creditor's claim is based on the lower petition date value.
Key points to remember:

• Legal requirement:

Section 350(b) of the Bankruptcy Code outlines the process for reaffirming a secured debt, and courts typically interpret this section as requiring the use of the petition date value for collateral valuation. In rare circumstances, a court may consider a different valuation date if there are significant changes in the collateral's value due to unusual market conditions or other factors.

[justbroke]

Can I Re-open my Chapter 7 discharge under under 530(b) to address a heloc that was not reaffirmed? Seek oversight from judge of what they are allowed to claim, back date the fair market value from when BK was filed in 2008, not today's market.

I don't see how this would work. If everyone could reaffirm a debt at current market value at the time of filing a bankruptcy, then this wouldn't be a fresh start but a head start. It is well known that appreciation of an asset post-petition may not be protected. See Wilson v. Rigby, 909 F.3d 306 (9th Cir. 2018) (debtor's attempt to amend schedule to account for post petition appreciation not allowed). Even if not reaffirmed, the secured creditor is put right back where they were at the time of filing for purposes of their non-bankruptcy rights.

The bankruptcy code you cite just determines the FMV value to be put on the reaffirmation agreement. It is all about disclosures. My guess is that the reason the FMV is on a reaffirmation agreement is driven mostly be vehicles (pun intended). When reaffirming a vehicle you want to be up front that the FMV is $20,000 yet your reaffirming it for $25,000. The purpose of the FMV on the agreement is not to change any non-bankruptcy rights that the creditor has when it comes to repossession, foreclosure, or other lienholder rights.

You're attempting to use the rules regarding the mandatory elements in a reaffirmation agreement against a debt that was not reaffirmed. Additionally, we are talking 16 years since the discharge.

The conventional wisdom back in 2008-2013, was to settle with the HELOC creditor right after discharge of the Chapter 7. If you wait, then the HELOC creditor will likely be in a better position as home values doubled since 2008 (or more). It was well understood that some HELOC (and inferior lienholders) creditors would "sit" and wait for the housing market to rebound, and then pounce. During the housing crisis, everyone understood that the HELOC lienholder would just lie in wait until the debtor sold the home or the property values doubled.

TL/DR: a discharged HELOC has the same rights as any consensual lienholder. They have a consensual lien against your property and can foreclose, should they choose. They must follow your State's non-bankruptcy law for foreclosure. The value of the home is the FMV at the time of the foreclosure (or today) and not when your case was filed in 2008.

[despritfreya]

I am not sure what you are trying to accomplish. Why would you care if the loan was or was not reaffirmed? There is no requirement to reaffirm a loan secured by real property (11th Circuit may be an exception). Further, a Reaffirmation Agreement needed to be entered into before the entry of the Discharge. Are you suggesting you would seek to revoke your discharge so that you can enter into a Reaffirmation Agreement 17 years later?

Attempting to reopening a case 17 years later is not only a stretch, it reeks of bad faith and may even be sanctionable. Can’t imagine any attorney assisting in this. Based upon the history I see no legal basis to even try (other than a stall tactic - which, it appears, you have successfully accomplished for the past 3 years).


Your posting on BK Forum from December 2021:


Originally posted by 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.


My response:

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.”

___________________

I checked to see if there were any changes to this. I didn’t find any. A case out of NY allowed a debtor who filed Chapter 13 some 12 years after the Chapter 7 to strip off the second mortgage but only because the home was worth $500k and the first mortgage holder was owed over $800k:

https://casetext.com/case/in-re-hopper-442013

Sorry to be the “downer” in this but all I see is that eventually, you will either settle with the lender or the lender will take the property.

Des.