Can I do a 7 and change to 13 to strip my 2nd mtg

[sevejose]

Can I do a 7 and change to 13 to strip my 2nd mtg.

I have 3 properties all are upside down, also 60k in Credit card debt. I want to get read of everything and just keep my principal home but this is my situation on my home, I have a:

225k 1st Mortgage
80k 2nd HELOC
190k Value of the home

One attorney told me I could start with 7 and right away jump to 13 to strip down my HELOC on my home. But another attorney said I can't do it. Please give me some help somebody. Thank you in advance.

[justbroke]

One attorney told me I could start with 7 and right away jump to 13 to strip down my HELOC on my home. But another attorney said I can't do it. Please give me some help somebody. Thank you in advance.

No. The process you're talking about is called a Chapter 20 because the Debtor files a Chapter 7, receives a discharge, then immediately files a Chapter 13.

It is the overwhelming majority view that it's not possible to actually strip a junior lien in a "Chapter 20", because the debtor can not receive a discharge in the subsequent Chapter 13. This was a major change that came with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Section 1328 of the Bankruptcy Code basically reads that you can't receive a discharge of debts in a Chapter 13, if you filed the Chapter 13 within four years of having received a discharge in a Chapter 7.

The only purpose for a Chapter 20, is to cure arrears on a mortgage, pay student debt, and/or pay priority tax debt.

So, ask your attorney, how you can strip a junior lien or liens in a Chapter 13, after having just received a discharge in a Chapter 7? Ask the attorney how 11 USC 1328(f) plays into this? Ask them if you don't get a discharge, then how do you discharge the resultant unsecured claim that the lien strip created?

Ask them to cite two cases.

While it may feel like I'm poking fun at your attorney... I'd like to hear of just ONE that this actually worked (actually received a discharge and the lien was actually quashed). I have a case below, but it was very strange and, in the end, the debtor received a voluntary dismissal, so no discharge.

Bankrupty Law Network - Chapter 20: San Diego Bankruptcy Court allows Lien Stripping in Chapter 13 after Chapter 7

The Southern District of California Bankruptcy Court in San Diego recently issued a ruling that allowed a junior lien to be removed in a Chapter 13 case, even though the debtor was not eligible to obtain a discharge. Discharge was not available since the debtor previously filed a chapter 7 petition and the new bankruptcy laws prevented a subsequent discharge within 8 years of that filing in another chapter 7 or 4 years in a chapter 13. Nevertheless, repeat filings without discharge are possible and often referred to as “chapter 20″ cases. Despite NO DISCHARGE, liens can still be eliminated in these cases! ...

However, Bankruptcy Law Network concedes that the case has some very specific "differences" from most. This case was a married couple and only one filed, so the lien does really stick as far as the non-debtor spouse is concerned. So, don't really get your hopes up, but it is interesting!

(Also, the Debtor voluntarily dismissed his Chapter 13 case, after this article was written... so... no discharge and don't know the impact of this case at all. It was fun and interesting until the Debtor did that.)

[mysticspirit25]

I think it will work on a 5 year plan then the "4 year rule" is past by one year, then after 5 years of payments on the junior loan, the rest is discharged.

[biotechsolution]

It's discharge date to file date.
Doesn't count your time in plan.

[justbroke]

I think it will work on a 5 year plan then the "4 year rule" is past by one year, then after 5 years of payments on the junior loan, the rest is discharged.

No. It will not work. It is discharge date to filing date. Please read 11 USC 1328(f) to understand the intricacies of how the BAPCPA amendments affected this formerly common tool in the Bankruptcy warchest. It's pretty clear and unambiguous in the Code. Essentially the BAPCPA of 2005 took the teeth out of the "classic" Chapter 20. No longer does a Chapter 20 benefit anyone other than someone attempting to cure arrearages on secured debt or dealing with priority tax debt.

11 USC 1328
(f) Notwithstanding subsections (a) and (b), the court shall not grant a discharge of all debts provided for in the plan or disallowed under section 502, if the debtor has received a discharge—

(1) in a case filed under chapter 7, 11, or 12 of this title during the 4-year period preceding the date of the order for relief under this chapter, or

(2) in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order.

[sevejose]

No. It will not work. It is discharge date to filing date. Please read 11 USC 1328(f) to understand the intricacies of how the BAPCPA amendments affected this formerly common tool in the Bankruptcy warchest. It's pretty clear and unambiguous in the Code. Essentially the BAPCPA of 2005 took the teeth out of the "classic" Chapter 20. No longer does a Chapter 20 benefit anyone other than someone attempting to cure arrearages on secured debt or dealing with priority tax debt.

Thank you very much for your clarification. I don't think I want to talk to that attorney again. Now based on your experience what do you think will be my best option in my case? thank you in advance.

[justbroke]

Don't get me wrong. While the overwhelming majority of attorneys, trustees and Courts have concluded that the lien strip isn't possible, there is some chatter that it may be "possible". Your attorney may be thinking of a "cram down" in the subsequent Chapter 13, but since there's no discharge, I don't see that working either. There's just no good caselaw to support it.

In your particular case, some have gone through the Chapter 7, not reaffirming the 2nd, and then later, offering to settle for say 10% (since the loan would be discharged). Of course, that would require an outlay of cash as a lump sum, and can easily be $8K in your case. Remember, they still maintain their lien after the Chapter 7.

[HHM]

Can I do a 7 and change to 13 to strip my 2nd mtg.

I have 3 properties all are upside down, also 60k in Credit card debt. I want to get read of everything and just keep my principal home but this is my situation on my home, I have a:

225k 1st Mortgage
80k 2nd HELOC
190k Value of the home

One attorney told me I could start with 7 and right away jump to 13 to strip down my HELOC on my home. But another attorney said I can't do it. Please give me some help somebody. Thank you in advance.

Can't do it that way.

[iv65536]

I think his question was whether he can strip a lien after converting a Chapter 7 to a Chapter 13.

[justbroke]

I think his question was whether he can strip a lien after converting a Chapter 7 to a Chapter 13.

I don't think it was a "conversion". The original poster was posting about a Chapter 20... a new Chapter 13 case, after receiving a discharge in his Chapter 7 case. That's a big difference.

[sevejose]

When you say not reaffirming the 2nd, and then later, offering to settle for say 10%. How long after, should I offer to settle and why would they settle? Would they have some pressure to settle or loose everything that way. Can they say no to a settlement?

And if they don't settle I would have to wait the 5 years and do a 13 to take out the 2nd. What happens if after the five years are up the value goes up a little can I still do the 13. Thank you for your help.

[HHM]

When you say not reaffirming the 2nd, and then later, offering to settle for say 10%. How long after, should I offer to settle Any time after discharge, and why would they settle? Because all they have left after a discharge is a worthless foreclosure right, they cannot pursue you personally for the debt. Would they have some pressure to settle or loose everything that way. Can they say no to a settlement? They don't have to settle, but many are

And if they don't settle I would have to wait the 5 years and do a 13 to take out the 2nd. What happens if after the five years are up the value goes up a little can I still do the 13. Thank you for your help. You could just start paying it after your file your bankruptcy. But correct, there is some risk.

See this blog post that explains the strategy.

http://askmethner.com/?p=450

[sevejose]

If I do this and the second does not want to settle, how long after doing the Ch 7 can I do the CH 13? so I can get out of the second mortgage. tks

[SMinGA]

4 years.

If you did not have to pay the 2nd now, would you have enough DMI for a plan payment? If so may be best to look into doing a ch. 13 now.

If I do this and the second does not want to settle, how long after doing the Ch 7 can I do the CH 13? so I can get out of the second mortgage. tks

[sevejose]

Sorry what is DMA? tks