Another strange scenario...hoping someone can help, cannot get attorney on phone

[LoveMySinbad]

yet today.

Hubby and I had a HELOC loan on our primary residence, it matured in July 2010. The lender would not negotiate a term that would fit within our budget, said they did not have to comply with mod rules/regs etc. They pressured us into signing over an interest in a mortgage receivable that is owed to us. We owe bank $113K, the mtg receivable is now well over $265K.

The mtg receivable was due to payoff Nov. 2010, and we would have satisfied the HELOC, now mtg assignment loan. However, the mortgagors defaulted, and filed chapter 12 bankruptcy. Their monthly payments up until then were how we paid the monthly payment to the HELOC bank.

We have been in limbo since. Hired a lawyer in FL here to help us try to settle and/or mitigate this heloc balance, but they want no part of that. We were served today with lawsuit paperwork under contract/indebtedness that they claim we owe them, which we do.

I am wondering, since this collateral that we gave them is now under bankruptcy protection, can we claim that same bankruptcy protection to put this lawsuit off until we get our money?

Reason for asking is this....the actual amount we are owed is in excess of $670K. There is an underlying mortgage on the property we sold these people to BOA, which is also still in my and hubby's name. The foreclosure on this has been stayed due to the bankruptcy filing of the new owners, even though they don't owe the mortgage co the money. I am just wondering if there is anything that can be done. We cannot help that they went into bankruptcy...we tried to foreclose, but got stayed as well.

If we had foreclosed, we certainly could have tried to resell and get this debt paid...any suggestions, ideas out there in internet land?

[despritfreya]

Let me rephrase:

You have 2nd mortgage (HELOC) on your primary residence which matured 1 year ago. You currently owe $113K (plus interest). In an effort to settle with the bank you assigned to the bank a portion of a $265k receivable which is secured by a 2nd on property that has value to support the debt. The receivable had been paying you monthly but was set to mature in November, 2010. Unfortunately the person who owed you money filed bk and did not pay you off in Nov, 2010 therefore you could not pay the HELOC off. The bank did not want to work with you. However, instead of exercising its rights to the property the bank has filed a suit against you for a money judgment.

“No”, the bk filed by the person who owes you money does not stop your creditor from suing you. You gave the bank an assignment of your right to collect from someone else, nothing more, nothing less. The bank still can collect against you.

Fortunately for you, you are a secured creditor in that other person’s bk. You indicate that there is equity in that property and, if foreclosed, you most likely would get paid in full. Since you are secured you are entitled to “adequate protection” payments even in the context of a Chapter 12. You need to find a good creditor attorney to fight for payment as a secured creditor. Having said that, you may need to explore your own bk. Since your HELOC has fully matured you will most likely need to file a Chapter 11 to pay the debt over a longer period of time than is allowed in a Chapter 13.

Another consideration is whether or not there is any equity in your home after consideration of your first mortgage. If not, you need to explore stripping off the 2nd lien in a Chapter 13 or 11.

Lastly, and on the other hand, your lender has elected to sue you under the note. You need to check if, by doing so, the lender has waived its interest in the property and, upon entry of the money judgment, becomes nothing more than an unsecured (judgment) creditor

Sorry if I was rambling. You have many issues and possible outcomes thus you need to find a good attorney.

Des.

[LoveMySinbad]

Well, Des, you summed it all up nicely. A little more information....home that HELOC was on is no longer our primary, we succeeded in getting a HAMP mod, first in house last year, then HAMP followed, not sure how that happened, but it did. At any rate, the home was just too large for our small family now, well over 4600 square feet, and not enough land to sustain our growing needs for space outside. We purchased a new primary residence in Jan. of this year, with funds from our retirement accounts (Through loans) knowing that eventually we would get some money out of the receivable to get it paid back in. The big home we lived in for over 10 years as our primary is currently leased for less than the new mortgage, but at least we can breathe a bit better and someone else is taking care of it.

We are dealing with one problem at a time right now. We don't have alot of credit card debt, our vehicles are paid for, so the only big debt right now that we just cannot get a compromise on is this HELOC, now mtg collateral assgnmet that we cannot get a compromise on. We were told Chapter 13 lien strip would not work since the home it was on is no longer our primary, but yes it would be way underwater, that is why the lender wanted it off the house in the first place...she said it was sitting there unsecured now....like the rest of the world I guess.

We are shown as a "claimee" on the Chapter 12 that the folks filed and will eventually, hopefully, get paid....in the meantime, we are worried sick over this lender now sueing us and wanting to get a jdmt against us.....they need to wait in line like the rest of us and we just don't know how to keep them at bay, hopefully, the attorney will.

We are worried for the few assets we have been able to accumulate over the years and I know they are at risk....seems silly to file bk over this one debt, and not sure we can qualify, but if we could, not sure how that would work with this money owing us that we cannot get our hands on and not sure when it will ever come...how would that be treated in BK?

I know it is a very complicated mess and I am so hoping the firm we hired is up to the task of looking out for our best interest all the way around. We tried to work out a compromise with this bank but all they wanted to due was keep extending the note for 90 days at interest only and then making us go through the hoops over and over again filling out financial statements, etc., every 90 days while getting no where in getting the debt paid down.

Current attorney said they hoped to work out a settlement with them, because it was a heloc, but I just don't see them budging knowing this other asset is sitting out there....what a mess we are in...K

[despritfreya]

“We were told Chapter 13 lien strip would not work since the home it was on is no longer our primary, but yes it would be way underwater. . .”

Then you got bad info. Since this property is not your primary residence you can modify the rights of the lenders, both 1st and 2nd. The property must remain income producing as you must show that it is “necessary for your effective reorganization”. If there is no equity to support the 2nd at all, it can be stripped off. The under-secured lender (1st or 2nd) would be subject to “cram down”. In a Chapter 13 you would be required to pay the cram down amount in equal monthly installments over 60 months, something that you probably cannot do. In a Chapter 11 you can virtually re-write the loan based upon the cram down amounts and pay them over a much, much longer period of time. There are some complications with Chapter 11's if the lender chooses an “1111(b)” election but you need to discuss your options with a qualified bk attny.

“We are worried for the few assets we have been able to accumulate over the years. . . seems silly to file bk over this one debt. . .”

If you only owe the two mortgages I agree, bk probably dumb. But, my guess is that you do owe a lot but, at the moment, are not behind. As to your non-exempt assets, including the receivable, the Chapter 11 (or 13) will take that into consideration in determining the terms of your Plan. You will not lose the assets.

As to your attny. . . let him continue to negotiate. You never know what may turn up. You can always pull the bk card.

Des.

[LoveMySinbad]

“We were told Chapter 13 lien strip would not work since the home it was on is no longer our primary, but yes it would be way underwater. . .”

Then you got bad info. Since this property is not your primary residence you can modify the rights of the lenders, both 1st and 2nd. The property must remain income producing as you must show that it is “necessary for your effective reorganization”. If there is no equity to support the 2nd at all, it can be stripped off. The under-secured lender (1st or 2nd) would be subject to “cram down”. In a Chapter 13 you would be required to pay the cram down amount in equal monthly installments over 60 months, something that you probably cannot do. In a Chapter 11 you can virtually re-write the loan based upon the cram down amounts and pay them over a much, much longer period of time. There are some complications with Chapter 11's if the lender chooses an “1111(b)” election but you need to discuss your options with a qualified bk attny.

“We are worried for the few assets we have been able to accumulate over the years. . . seems silly to file bk over this one debt. . .”

If you only owe the two mortgages I agree, bk probably dumb. But, my guess is that you do owe a lot but, at the moment, are not behind. As to your non-exempt assets, including the receivable, the Chapter 11 (or 13) will take that into consideration in determining the terms of your Plan. You will not lose the assets.

As to your attny. . . let him continue to negotiate. You never know what may turn up. You can always pull the bk card.

Des.

OMG! Thank you sooooo much. I so appreciate this information. You made my day. I wanted to do a lien strip first before going the debt mitigation route.....now to just prove that the current mtg assignment they are suing us for is actually the heloc they made us move to this new loan, which all the paperwork shows this and the mortgage has not yet been released of public record. Thank you so much, we are early in the process as far as suit goes, just got the summons yesterday. Have a fantastic day

[LoveMySinbad]

Have spoken with BK attorney today, although, I am still very confuzzled. His suggestion was a Chapter 13, but I don't quite understand how the payment are calculated....can someone help me please? He said it is based upon our equity in our assets?

Old primary Residence.....Value $250,000 Mtg Balance $525,000

Investment Property Value $18,500 Mtg Balance $28,000 ( we want to keep this one), value will come back...this value is based on a realtor BPO as of today

Current Primary Value $141,000 Mtg Balance $47,000; 2nd Mtg $35,000 Equity $59,000 (Is HX property exempted? )

Vehicles/Horse Trailers Value $44,000 (do they count in assets for Chap. 13?)

I really am so confuzzled and just wonder if a chapter 7 we should just get it over with?

Main reason for this is the lawsuit for contract/indebtedness filed for $115,000 for prior HELOC on our old primary that is very underwater.

We have credit card debt less than $7500 at this time.

He suggested the chapter 13 and just pay it for 60 months then write off the lawsuit one.

The other issue is the mortgage receivable that we own that is tied up in Bankruptcy....he said that will not come into the picture, as it's value is not even able to be determined yet. The people owe us $650,000 of that $435,000 is an underlying mtg to BOA and the balance is to come to us, however, we have no idea if we will have to pay shortages to boa or even foreclose if the bankruptcy does not go through)...anyone with thoughts on this one?

What a mess....

[despritfreya]

Not such a mess. . .

The premise behind a Chapter 13 (or 11) is to pay to your general unsecured creditors an amount equal to what they would get if you had filed a Chapter 7. In a Chapter 7 the Trustee takes control of your assets. He then liquidates anything that is not exempt. Once liquidated he disburses that money to your creditors. A Chapter 13 allows you to keep the non exempt assets so long as you agree to pay your unsecured creditors the value of those assets over the 5 years.

The amount of your monthly Plan payment will depend upon what must be paid. For example, the following must be paid (if you owe these type of debts) -

Mortgage arrears
Secured creditors (like an auto) plus interest
Taxes
Delinquent support obligations
Value of non exempt assets.

(This is not an all inclusive list - but you get the idea)

Once you add up what must be paid you add to that amount any attorneys fees and then cap it off with the Chapter 13 Trustee's fee (10%). You then take the grand total and divide it by 60 (60 months) and that is your payment. You then have to formulate a budget that shows you can afford the payment.

In valuing your assets you want to make them worth as little as possible. You do not use “replacement” value. You use something akin to “Craig’s List”/garage sale value. For example, the horse trailers. . . If they are something less than say a warmblood size 3 horse (or more) slant with living quarters they probably are not worth a ton. You have to start thinking in those type of terms. The less your non exempt assets are worth the less you have to pay to your general creditors. If there is a question on a particular item get an appraisal but make sure the apprasier is giving you a "liquidation value" appraisal.

Hope this helps.

Des.

[LoveMySinbad]

Yeah, so glad you showed up...you know what you are talking about. I understand the repayment now, I believe. Our new homestead, do we have to pay the difference between the mortgages and what it's worth or is homestead exempt? One of the horse trailers is a LQ, BUT, in speaking with my attorney today, I do and can put liens on the ford truck and the two horse trailers. We did legitimately get a loan from a very generous individual, a personal loan, in January of this year. I would feel so much better knowing his loan was secured and thereby also protecting these assets with a lien on them. The loan is well documented with copies of the checks and promissory note. It is for $35,000. I have not filed the liens yet, but the tag office told me I could put the lien dates of 1/19/11 when we actually got the loan. I was showing this lien as a 2nd mortgage on the primary, but if we don't have to use any equity in the primary, this scenario I hope will work and then we won't have that much asset value to add in. He talked about surrendering the big home that is way underwater, although, I feel really bad such a nice couple is renting it, however for about 700 less than what the payment is. I wish we could cram it down and keep it at what it's current value is...I love the old house, raised our kids there, but we will do what we have to. No mortgages are in arrears, we owe two years real estate taxes on the smaller lake property that has declined, have not paid that yet, waiting to see what would happen here. We have no other delinquent obligations...the main thing forcing this is the lawsuit for the HELOC on the big first that was filed for $115,000 last week. So what do you think?

Am I thinking ok or way off base?


Another question/thought....since this is all brought about because we sold some property in TX and held the mortgage and the people could not pay us when they were supposed to. They are in Bankruptcy, chapter 12, which basically has us on hold....IF by some miracle they pay us off in the next year like they are supposed to, I was told I have the option of dismissing this chapter 13 and paying the creditors myself. I really really wanted to be in a position to negotiate this HELOC with this lender, but if we get this payoff while in this chapter 13 plan, I don't want them to just get handed the whole thing, I still wanted to control it. They jerked us around so much over the last year, I just want to be in a driver seat with them...my attorney also told me this is something we could do. Thoughts?

Regarding adding attorney fees per month....I guess I don't understand that either, as I am paying the attorney up front a flat fee?

[despritfreya]

“Our new homestead, do we have to pay the difference between the mortgages and what it's worth or is homestead exempt?”

If you are entitled to claim a “homestead exemption” (isn’t it unlimited in Florida??? Also depends upon how long you have been in the home) the equity up to that exemption amount is protected and does not get paid to the creditors. Any amount over the exemption must be accounted for in the Plan.

“One of the horse trailers is a LQ, BUT, in speaking with my attorney today, I do and can put liens on the ford truck and the two horse trailers. We did legitimately get a loan from a very generous individual, a personal loan, in January of this year. . . The loan is well documented with copies of the checks and promissory note. . . I have not filed the liens yet, but the tag office told me I could put the lien dates of 1/19/11 when we actually got the loan. . .”

Hold on a minute. . . If you do this (assuming the lender is not an “insider” and depending upon the relationship he/she may be) you will have to wait 91 days from the date you change the debt from unsecured to secured. If you do not wait, it is a preference which can be set aside thus requiring you to pay the value to creditors anyway. BEFORE YOU DO THIS YOU NEED TO VERIFY WITH YOUR ATTORNEY THAT YOU ARE NOT SCREWING UP YOUR CASE. Specifically discuss with the attorney whether or not your actions will create a “preference”.

Again, you do not have to give up the rental and can do a cram down but probably not in the context of a 13. Did you discuss the benefits of a Chapter 11? If not, you really need to as you want to have all of your options put on the table. As to the fact that your renters are not paying enough right now, if you do a cram down the actual monthly payment to the lender will be reduced (especially if you propose to pay the cram down amount over the remaining life of the loan, assuming the loan does not have a balloon payment) and you could create a positive cash flow.

Des.

[LoveMySinbad]

Yes, I am in Florida....we have been claiming homestead in florida for 30 years, always lived here. Left the big house in January and bought this one, needed to downsize and have more acreage for the horse business. So, if we have a $47000 lien on it and we paid $141000 we don't have to pay any difference on this one?

The other two have no equity, so the only equity we are talking about are the trailers and vehicles, best I can tell. The lien will show a date of 1/19/11...that is when the money was borrowed, we just didn't want to spend the $75 per title to put it on there at the time. I did not personally know the person, my financial advisor introduced us to him and said he makes loans with some of his investment money. We planned to pay him off when we got our mortgage money..haha..whenever that is. I guess I should ask him.

The cram down I was talking about is the big house that is owed $525K, but worth about $250...I wonder if a chapter 11 is much more than a 13? He really didn't get into that, but honestly, was just a brief phone conference to see what we can do. I've not filled out any paperwork yet.

[despritfreya]

Sounds like you need to sit down with the attorney face-to-face and go over everything including back dating the lien. In my State that is a no-no. As to the homestead, you may be capped at approximately $146k in equity but it sounds like you do not even have that therefore (and assuming it is a valid mortgage lien - not some lien you put on it to reduce the equity) you should be be fine.

Des.

[LoveMySinbad]

Well, thank you very much! The $47000 is a legitimate lien, hubby borrowed from his 401K for purchase of the home, that is the only thing they would allow a loan for. The entire property is not worth than $141,000 if we didn't have any lien on it, so I guess it would not be counted as equity for the 13...if that is what I am understanding...yes, I do need a sit down with him and go over this stuff...I sure don't want to mess anything up and honestly, I'll pay the $25000 equity for the trailers/vehicles if that is what I need to do to not have a problem! Have a nice night