Are primary residences not allowed to be part of the BK?

[JackBondLove]

I was reading this article by a famous economist (and former Labor Secretary) Robert Riech.

http://www.commondreams.org/headline/2011/06/03-3

There is a sentence that doesn't seem to make sense:

Amend bankruptcy laws to allow homeowners to include their prime residencies in personal bankruptcy (giving them more bargaining leverage with their lenders to renegotiate mortgage loans).

I thought that as part of a person's assets, and surely as secured debt, that a home is always part of the BK.

What do you think was meant by this sentence?

[despritfreya]

Without reading the article. . .


He is referencing the fact that the Code does not allow you to modify the rights of a secured creditor that is secured solely by the debtor's principal residence. No "cram down" of value therefore no leverage to negotiate.

Des.

[HHM]

Correct, he is probably just referencing the fact that the BK code provides no mechanism to modify a primary residence mortgage. All you can can do is pay it, or surrender it (but you do receive a discharge of the debt).

[JackBondLove]

But what about lien stripping? Or is that only for a 2nd mortgage?

[IamOld]

But what about lien stripping? Or is that only for a 2nd mortgage?

Alas, that is correct Jackbond, that is only for a 2nd.

[despritfreya]

Not quite IamOld,

You cannot strip a junior lien if there is even 1 cent of equity in the property after consideration of the senior lien. The creditor must be "wholly unsecured" as opposed to "under-secured". If there is any equity as it relates to being secured solely by the debtor's principal residence the anti modification provision of the Code applies.

Des.