Foreclosure - After or before ch 13? Who's Mr. Right?

[screwedupbyRE]

Hello folks, me again.

Situation: (in short): Own two homes:
#1. Primary resi, first loan 623k, second: 157k (no refi)
#2. Second Home: Letting the house go in foreclosure, first loan $570, second $130. Paid 20% down when bought it (did refi and took out 30k for home improvements). Now house worth 350k. All $s gone here.
#3. 104k on CC

Intent: Plan to keep #1, and cram down the second loan (i.e. 157k). House now worth $550.


Met with 3 attoneys, with three different view. My head is chocked. Pls advise who's right as per your experience. All of them are 100% confident. Here's what they are saying:

According to Mr. A (30-40 yrs of experince): I can't do ch 13 because I exceed the secured (336k) and un-secured (1M) limit. Absolutely makes sense. End of story.

Mr. B (25-30 yrs of experience): I must complete the foreclosure on #2 before I file ch 13. In this case, UST will not consider foreclosed home (or debts) and wouldn't know if there's any debt that is due to the bank (or attoney thinks after foreclosure, I don't owe anything and he would show/disclose it while filing). In this case, if bank issues me 1099, it will be convered in the bankruptcy. Makes sense.

Mr. C (30-35 yrs of experience): I must NOT complete the foreclosure on #2 and let is go in banckruptcy. He says UST can't determine the secured or unsecured portion of the loan for #2 and hense I'm OK with ch 13. On the second note, he says we dont have to mention it since house is in foreclosure. This makes sense too.

So who's Mr. Right?

pls help. life is already complex, and they are making it more complex. I'm in deadlock.

[lrprn]

According to Mr. A (30-40 yrs of experince): I can't do ch 13 because I exceed the secured (336k) and un-secured (1M) limit. Absolutely makes sense. End of story.

Actually you have these amounts reversed. As of April 1, 2007, to file Ch 13 your SECURED debt can't exceed $1,010,650 and your NON-SECURED debt can't exceed $336,000. You appear to under both limits given the figures you shared with us.

If this lawyer really did give you these max figures as you have them stated here, then I would reconfirm with him that's what he meant. If he doesn't flip these, then this lawyer is not the one for you.

The reason you may be getting different opinions about surrender/don't surrender your home before filing is if your local bk court judge hasn't made a ruling yet on whether the payments on a surrendered asset can be included on your filing forms or not. You need to ask lawyers B and C if you will be able to list the payments and upkeep costs on a pre-filing surrendered property or not when you file. Ask how other cases they filed have come out when a property not the family home is surrendered before and after filing. Get actual examples of how each case turned out and why.

So who's Mr. Right?

Without more information, there's no way to tell at this point. Have you considered setting up a fourth consultation appointment to help break the deadlock? There's nothing magical about 3 consultations. You meet with lawyers and do your own research until you are satisfied one recommendation is best in your situation. There's no easy out when you have a more complicated situation like yours and need to file.

[screwedupbyRE]

Thx for your response Irprn.

Abt s/us debt:

secured: 623K (see #1 above) + 570K (see #2 above) = 1,193,000 - Exceeds secured debt limit.

un-secured: 157K (#1 second loan, planing to cram down) + 130K (#2, second loan) + 104 (credit cards) = 391,000 - Exceeds un-secured debt limit.

In fact I met with more than 7 attorneys and came up with these three sets of details. There are more than 3 attorneys under Mr B. category that are asking to foreclose the house before filing ch 13.

All of them says they have done this in past.

Another thing I'm not sure if lender would seek deficiency judgment after/while in ch 13 if I go with B or C.

Any insight?

[screwedupbyRE]

also, about:

The reason you may be getting different opinions about surrender/don't surrender your home before filing is if your local bk court judge hasn't made a ruling yet on whether the payments on a surrendered asset can be included on your filing forms or not. You need to ask lawyers B and C if you will be able to list the payments and upkeep costs on a pre-filing surrendered property or not when you file.

According to both B and C, I can't show the payments becuase that would qualify me for ch 7 and judge will dismiss the filing. I run -$380k DI while doing means test. So we'll not show payments on this house on the forms, and judge wouldn't know. That brought up another question I asked above about deficiency judgement.

thx much!!!

[Frogge]

My Attorney would fall under "B"

We are in a similar situation, although 2nd home is in another state.

My attorney is first working through a deed-in-lieu for 1st and or 2nd on our old home before we consider anything else. We are getting through the extra home problem first, then will look at filing later when it's out of the picture.

[screwedupbyRE]

We are going with Mr. B, and getting rid of the second house first and then file for ch 13. I started the deed-in-lieu process with Countrywide this AM - let's see how long they take....

just curious... your attorney is dealing with the bank for deed-in-lieu process? Is he charging you for this service? If yes, how much?

Thx for your response.

[Frogge]

I'm afraid I'm not going to be much help with the cost question, mine is a situation where my attorney is a colleague of my boss, so cutting me a 'deal' so to speak through my boss for the whole DIL/foreclosure/BK process. I approached him with the BK idea (that's his specialty, however he handles RE issues as well) and he suggested going this route first.

Maybe someone else can give an idea-- what an attorney charges to handle a deed-in-lieu?

[r.m]

[Intent: Plan to keep #1, and cram down the second loan (i.e. 157k). ]

Where'd you get the idea that you could cram down a second on a personal residence?

[BKParalegal]

[Intent: Plan to keep #1, and cram down the second loan (i.e. 157k). ]

Where'd you get the idea that you could cram down a second on a personal residence?

The BK Code says or more importantly is interpreted where that if a primary residence is valued at equal to or less than the first mortgage, then the 2nd or really any other liens not in first position are considered unsecured and therefore can be "stripped off" in a Chapter 13. The key here is this can only be done in a 13.

Good Luck