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Chapter 13 Lien Strip Question

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  • Chapter 13 Lien Strip Question

    So for those following my posts, my 341 meeting was a breeze! the confirmation will take place next month. I am attempting to strip my second mortgage since my property is underwater. My case already has an appraisal attached to it that confirms my property is upside down.

    I am still getting statements from my HELOC mortgage holder for the monthly payments due. The bank kept on sending me statements even after I filed for chapter 13. I've already informed my attorney and he said I can stop making my payments towards my second mortgage and has already assured me that there will be NO issues. He DOES tend to return all my calls HOWEVER I would like to read about real life experiences regarding this issue.

    Here's my question, what is the reality behind this whole process as far as a lien strip? is the HELOC mortgage holder going to keep sending me statements? can I actually STOP paying my HELOC which I am attempting to strip off under my ch. 13 case? I am assuming that stopping payments will make my HELOC late and accrue late fees etc. are these late fees for lien strip considered arrears? what happens when i complete my ch. 13 as far as the HELOC/lien strip? what's the worse that can happen? can someone PLS share their lien strip experience?

    I would like to add that my attorney uses an EXTREMLY credible appraiser and this was the individual that generated a full report regarding the value of my property which was attached to my ch. 13 case.

  • #2
    First, they should have already stopped sending statements! Your attorney will deal with that separate issue. As for lien stripping... it's a breeze in the 11th Circuit where In Re Tanner is the precedence! Very simple, very easy, and usually the banks don't even bother to object or challenge the lien strip -- provided that you have sufficient documentation of the value. (You do have great documentation of the value by having a recent full appraisal performed by a licensed property appraiser.)

    Your HELOC won't be -- technically -- in arrears. It will be treated as an "unsecured debt" in the Chapter 13. So long as you receive your discharge, the HELOC will be stripped away as if it never existed. If your Chapter 13 is dismissed or you convert (to Chapter 7) then you would be in an arrears condition.

    The worse is that your case dismissed or you convert. In this case, the lien strip is "void" and the lender's lien is in full force and affect. The normal case is that you are granted the lien strip and your cases progresses to and past discharge. After discharge, the lender must issue a Release of the Mortgage (or satisfaction) with the recorder of deeds. Once that occurs, the lien will be gone.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      Originally posted by justbroke View Post
      After discharge, the lender must issue a Release of the Mortgage (or satisfaction) with the recorder of deeds. Once that occurs, the lien will be gone.
      This is the first time I've heard that a lender has to record a release of mortgage. Maybe this varies by district, but in my district after the Chap 13 plan is completed, the debtor (usually through his/her attorney) has to ask the bankruptcy court to enter an order voiding lien that the debtor records with the county recorder where the property is located. It is up to the debtor to make sure the order is entered by the court and recorded with the county recorder.

      bn7, I'm stripping my lien, but haven't gotten to the end point. As, JB says, the process of getting the order valuing the lien was very simple. I stopped paying my second mortgage as soon as I new I was filing Chap 13 and stripping the lien. My attorney filed a petition stating my home is worth less than the first lien and including evidence of the value. The creditor didn't object and the court entered an order stating that the 2nd is wholely unsecured and shall be paid in my BK with other unsecured debt. My lender sent me "informational" statements until they received notice of the lien strip petition.

      Trust your attorney and stop paying the 2nd mortgage.
      Last edited by LadyInTheRed; 10-05-2011, 06:40 PM.
      LadyInTheRed is in the black!
      Filed Chap 13 April 2010. Discharged May 2015.
      $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

      Comment


      • #4
        Originally posted by LadyInTheRed View Post
        This is the first time I've heard that a lender has to record a release of mortgage. Maybe this varies by district, but in my district after the Chap 13 plan is completed, the debtor (usually through his/her attorney) has to ask the bankruptcy court to enter an order voiding lien that the debtor records with the county recorder where the property is located. It is up to the debtor to make sure the order is entered by the court and recorded with the county recorder.
        You want to know something even more significantly different? In some Districts, the Order Granting the lien strip is in a "recordable" format so that if the creditor doesn't release the lien, the Order can be recorded with the recorder of deeds!

        In Florida, the Order granting the Lien Strip is a final order and you don't need to seek an order to avoid the lien separately.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          Things would be so much simpler if they'd make this stuff uniform!

          I tried to find the procedures for Alabama, but I didn't find anything on various Alabama BK court websites that was helpful. bn7, whatever the procedures are in your state, your attorney will handle it. It doesn't hurt to ask your attorney now what the procedures are so that you can make sure your attorney does what is needed, if anything, when your plan is complete.
          LadyInTheRed is in the black!
          Filed Chap 13 April 2010. Discharged May 2015.
          $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

          Comment


          • #6
            Thank you all for you replies and for keeping me sane! I will keep making more posts as my case progresses.

            Comment

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