lein stripping

[Lajazz947]

Question:

I will mention to my attorney that I may try to have my equity line stripped due to the fact that my home may be worth less than both the first and second combined.

How does this work?

Do I need an independent appraisal?

Will the trustee order one and who pays?

If the entire second is not unsecured can i strip part of the lien or is it an all or nothing deal?

I am sure that given the 1st, the 2nd and the mechanic's lein ( still in litigation but I understand that the filing puts the lawsuit to rest) that I have negative equity.

Thanks

[S2008]

Lajazz,
To answer your question about stripping the second, my understanding is that your second mtg must be totally unsecured. In other words, your home current market value needs to be less than your first mortgage. Others may comment on this . . . I admit my knowledge is very limited . . .

[laurannm]

S2008 is correct...in order to lien strip your house must be worth less than the total of your first mortgage, not your 1st and 2nd combined. And the 2nd must be 100% unsecured.

From what I have seen, when you try for a lien strip, the lender will most likely want a full appraisal done. Not sure who typically pays thugh

[biotechsolution]

Question:

I will mention to my attorney that I may try to have my equity line stripped due to the fact that my home may be worth less than both the first and second combined.

How does this work?

Do I need an independent appraisal?

Will the trustee order one and who pays?

If the entire second is not unsecured can i strip part of the lien or is it an all or nothing deal?

I am sure that given the 1st, the 2nd and the mechanic's lein ( still in litigation but I understand that the filing puts the lawsuit to rest) that I have negative equity.

Thanks

you can only lien strip in a chapter 13. in a chapter 7 they are still considered a secured creditor doesn't matter if the value is less than owed. same situation has a financed auto. If you don't pay they can foreclose.

[HHM]

The prior posts have summed it up.

1. You can only lien strip in a 13.
2. There must be zero equity that touches the 2nd mortgage, i.e. the home is worth less than the 1st.

If the value of home is on the border, then yes, you would want a professional appraisal.

[mesa777]

I was going to go the lien strip route until my attorney told me thats its not worth the hastle! He told me that several years ago he did a lien strip for another person, that person 6-7 years later goes to sell the house and the person cannot close the home sale due to the lien still showing on the home.... My attorney told me to just walk away, save money and buy in a few years when home prices have fallen another 15-20%.... Am thinking about just letting the mtg company have the house, zero equity, payments current however if I am going to try and file a chapter 7 anyways and the house payments are killing me I am just going to go 100% with this and start over....

[BKParalegal]

Your attorney is a spineles wimp and I would run for the hills. In regards to the lien stripping, I incorporate verbage in the plan that states at the time of discharge the lien will be released by "2nd Lien Holder Name Here". I also incorporate it into the order of confirmation that the judge signs, so that I have it in two places. Then when you get your BK discharge, we send them a letter with a 30 day notice to release the lien. If they don't we sue them and rack up a bunch of legal fees! Your attorney sucks!

[HHM]

It's a bit hasty to conclude that this attorney is being a spineless wimp, he may just be being practical. If the home has zero equity, the payment on the frist is even too high, and mesa777 has other debt issues that would be better served by a chapter 7, then yes, doing a 13 and lien stripping probably is a waste.

From a strict financial perspective, if someone is upside down in their home even after stripping the 2nd, they really are better off letting it go and buying again in 2-3 years vs trying to dig out of negative equity.

[baguy]

I'm in a similar situation, comtemplating a lien strip on a wholey unsecured 2nd mortgage in chapter 13. However, in my district (northern illinois), none of the laywers I talk to seem to think it can be done. Only 2 laywers I talked to have ever heard of it. And those two say that it has never been done here, and I would be "plodding down virgin law in the 7th circuit." They seem to think that the judge here would not read 1322(b) beyond its plain language (does not allow the debtor to modify the rights of holders of secured claims that are secured only by a security interest in real proeprty that is the debtor's principal residence), and would not go for this.

So, based on anybody's experience in this, is it even worth trying? Is there some kind of "national" case law that makes this lien strip in a 13 standard? Or am I just out of luck, or are my lawyers lazy?

Thanks for any input you may have.

[BKParalegal]

It's a bit hasty to conclude that this attorney is being a spineless wimp, he may just be being practical. If the home has zero equity, the payment on the frist is even too high, and mesa777 has other debt issues that would be better served by a chapter 7, then yes, doing a 13 and lien stripping probably is a waste.

From a strict financial perspective, if someone is upside down in their home even after stripping the 2nd, they really are better off letting it go and buying again in 2-3 years vs trying to dig out of negative equity.

I was not addressing his lack of vertebrae based on if it was financially sound to do the lien strip, my accusation toward his limpness was based on the attorney's comment of not being able to get the lien released on a previous client. That garners, in my eyes, an attack upon his ability to stand upright.

[BKParalegal]

I'm in a similar situation, comtemplating a lien strip on a wholey unsecured 2nd mortgage in chapter 13. However, in my district (northern illinois), none of the laywers I talk to seem to think it can be done. Only 2 laywers I talked to have ever heard of it. And those two say that it has never been done here, and I would be "plodding down virgin law in the 7th circuit." They seem to think that the judge here would not read 1322(b) beyond its plain language (does not allow the debtor to modify the rights of holders of secured claims that are secured only by a security interest in real proeprty that is the debtor's principal residence), and would not go for this.

So, based on anybody's experience in this, is it even worth trying? Is there some kind of "national" case law that makes this lien strip in a 13 standard? Or am I just out of luck, or are my lawyers lazy?

Thanks for any input you may have.

There isn't national case law, it is seperated out by district. There is plenty of precedents in a variety of districts for an attorney in your district to glean from, if you have to file Chapter 13, then I would search out for an attorney that is willing to pursue it. Try visiting NACBA.org, for an attorney. The worse that can happen is the lien strip is denied and you still have to pay it, but if you do win, than you are way ahead of the game and it will be worth the trouble.

Good Luck

[baguy]

Thanks again BKParalegal. I wish I was filing in CO. Or I wish that there were some lawyers in IL that knew what they are doing. It's amazing the differences in BK knowledge from one lawyer to the next I talk to.

[nathan005]

you can only lien strip in a chapter 13. in a chapter 7 they are still considered a secured creditor doesn't matter if the value is less than owed. same situation has a financed auto. If you don't pay they can foreclose.

what if you don't pay the 2nd and it charges off and becomes unsecured. Can you get rid of it in a chpt 7.

[justbroke]

Your attorney is a spineles wimp and I would run for the hills. In regards to the lien stripping, I incorporate verbage in the plan that states at the time of discharge the lien will be released by "2nd Lien Holder Name Here". I also incorporate it into the order of confirmation that the judge signs, so that I have it in two places. Then when you get your BK discharge, we send them a letter with a 30 day notice to release the lien. If they don't we sue them and rack up a bunch of legal fees! Your attorney sucks!

I agree with the spineless part.

I was lucky to watch a lien stripping hearing in the Bankruptcy Court this past Tuesday. The debtor's attorney had appraisal in hand. The Bank's attorney had every excuse in the world why it shouldn't be stripped, but no substance.

The only thing that was interesting, the debtor's attorney asked for the lien to be stripped immediately. The Bank's attorney asked for it to be stripped at the successful completion of the case (discharge). The judge entered an order stripping it immediately stating that there were some changes due to the 2008 Foreclosure Prevention Act (FPA).

Very interesting. So long as you have a professional appraisal... you're okay. I assume the problem in the case I witnessed is that the Bank never got their own appraisal, so the Judge took the debtor's appraisal as the only evidence presented, and used that number.

So sweet! I wish I could avoid my 2nd on my other home. I would have kept it!!!!!

[justbroke]

what if you don't pay the 2nd and it charges off and becomes unsecured. Can you get rid of it in a chpt 7.

I don't believe it becomes unsecured because of a charge off. The Bank still holds a lien on the property, and that's the key to the whole thing.

Now if the creditor files a notice of satisfaction (with the appropriate recorder of deeds) along with the charge-off, then that's different.