Can someone tell me how lien stripping works >

[mesa777]

Have a home in AZ, have a first and second.. home is worth probably $15-20K less than what I owe... Have a second mtg. for $25000.00 if I file BK would I be able to "strip" this second in BK?

Opinions please....

[HHM]

For the type of lien you are talking about (2nd mortgages)....

1. You can only lien strip in a chapter 13
2. There cannot even be 1 penny of value in the house that would touch the 2nd mortgage.

So, for example, if your house is worth $250,000, with two mortgages: 1st $265,000, 2nd $45,000, you can lien strip the 2nd. However, if that house is worth $266,000, you cannot lien strip. Lien strips are ALL OR NOTHING, so even if the house is worth 265,002, you could not lien strip the 2nd.

[FreshLikeADaisy]

HHM, what happens if you lien strip in a Ch13 and later convert to a Ch7: is the second mortgage (lien) then reinstated?

Also, is there ANY way to dispose of a second mortgage in a Ch7 and still keep the house?

Thanks in advance.

[HHM]

HHM, what happens if you lien strip in a Ch13 and later convert to a Ch7: is the second mortgage (lien) then reinstated?

Not totally sure, but I would imagine that the converstion would have to be in good faith.

Also, is there ANY way to dispose of a second mortgage in a Ch7 and still keep the house?

That question is easy to answer, "NO"

[FreshLikeADaisy]

Thanks.

[HAP]

Awww Daisy are you looking out for me (just kidding).

[FreshLikeADaisy]

Yeah, pretty much -- foreclosure resolved all my mortgage difficulties

[FreshLikeADaisy]

(We were talking about it and then two minutes later I read this thread... I couldn't not ask, because by then I wanted to know too!!)

[RickInMich]

HHM is right. There is NO way to get rid of that damn second mortgage in Ch. 7.

So... we've decided to lein strip it ourselves by letting our house go into foreclosure and then have my wife's parents buy it back at auction, hopefully at a greatly reduced price! I know we're taking a bit of a chance that we won't be the high bidders, but we're going to give it a shot. I wonder, though, how can we assure our first will be the ones to foreclose first? If the second foreclosed, then I think there's all sorts of issues.

[HAP]

It is an interesting topic isn't it? The appraiser comes tomorrow, so in a few days, we'll see what he says.

Good luck to you Rick, I hope it works out for you

[mesa777]

So am I correct here.. lets say I owe $200,000 on the first mtg and then $25,000 on the 2nd mtg... IF my home is appraised at $199,000 I am able to wipe out the 2nd mgt?

How do I go about picking a person to do the appraisal that everyone trusts, including the owner of the 2nd mtg???

[HAP]

Our attorney didn't specify who we should use (other than the obvious of a licensed appraiser).

My dad is a real estate broker and we used the guy he normally calls. That doesn't get us any favors (except maybe a price break on the appraisal) he still has to be fair and honest with his appraisal. Our attorney said of the "several" lien strippings he's done, he's never had the appraisal challenged by the 2nd mortgage company. He said if it ever happened, it would come down to one appraiser's testimony/opinion over the others.

So we first have to see what the appraisal comes in at and secondly that the trustee goes for it and it's not challenged and then we'll go from there.

[HHM]

I just spoke with my attorney Tuesday we talked about lien stripping and I asked that very question. If you start with a CH13 and strip off the 2nd and later convert what happens? Well the Judge then adds the 2nd back on plus whatever fees and interest and you would have to pay all past due amounts and bring the loan current just like any CH7 if you want to keep the house. Basically it would cause you to lose your house.

Thank you for the clarification. I suppose it makes sense that for the lien strip to work, you have to be discharged from the chap. 13. But, based on my understanding of the BK code, I am not exactly sure why that would be the case, but nevertheless, I suppose having it that way prevents abuse. (i.e. having someone who qualifies for a 7 file a 13, strip the lien, get the plan confirned, and then turnaround and convert to a 7).

[BKcrazy]

Yeah, pretty much -- foreclosure resolved all my mortgage difficulties

I'm sorry, but I had to chuckle at the one statement. I'm in the same boat, but thank goodness it falls in under the BK as far credit reporting goes. (so my attorney tells me)

[FreshLikeADaisy]

BKcrazy, it's all good. I am living with family at the moment, and it just so happens that I am a bleedin' heart, treehuggin' save-the-whales-and-God-bless-Greenpeace liberal, and my mother is a fanatically religious Republican who, I am certain, at some unspoken level is absolutely convinced that Dubya is the Second Coming. You should have been there when she said that if I voted (non-Republican) she would drive me down to the homeless shelter to live, and I quite cheerfully looked her in the eye and said, "Well, that'd resolve my housing difficulties anyway," chuckled and walked away. That's one of my favorite one-liners anymore, actually.

You'd be amazed at how many problems I don't have anymore -- I'm too damn poor to have 'em! In that sense, I am very very blessed.