Forum Rules (Everyone Must Read!!!) (updated: 04/28/2015)

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Mortgage reduction

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  • Mortgage reduction

    Louisiana here. I've come across an exception for a Ch. 13 of a mortgage reduction or fair market value of home should the home not be ones primary residence. .
    How would the rules apply when lender demands the property be vacated(via landline). Debtor moves out, a year passes, is still renting and decides to file BK before the sheriff sale two months away? Is a mortgage reduction possible when no other leins(2nd or 3rd mortgage) are attached? Not qualified for cramdown

  • #2
    Aside from the issue that you want to move back so the property is really, by intent, your primary residence. . .

    Unless this prior residence that you are now going to claim as "investment property" is income producing you are not keeping it in a Chapter 13. "Income producing" means that the rents generated must produce enough income to give you a small cash flow after consideration of all related expenses, including the mortgage (as modified if you are successful), association dues (if any), property taxes, upkeep etc.

    In theory, even if the investment property is worth more than what is owe (no cramdown), you could attempt to modify the terms of the loan, but a Chapter 13 is not going to work because any modification would require the entire loan be paid within the 60 months of a Chapter 13 Plan. You would be looking at a Chapter 11 which would allow you to attempt to modify the terms beyond a 5 year payout. I doubt you want to do a Chapter 11 as such is very, very, very, expensive.

    If you have equity in the property why have you not sold it, paid the loan and pocketed the profit?



    • #3
      despritfreya has provided the best advice that I couldn't come close to.

      I had this same issue in a Chapter 13 with an income producing Property. At first, I decided to keep it but immediately after filing it went vacant. This caused some issues for me because I had to give the Trustee quarterly updates of the rents and costs. I filed Chapter 13 Pro Se, which was a foolish thing, because I didn't know that I could also save my primary residence. So I learned about lean stripping, moved back in, and filed a lien strip and was successful. Then I decided that dealing with the investment home was useless because it was a drain on me and quickly became infeasible (with it unoccupied).
      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.


      • #4
        Thank you both. Encouraging to hear from others. Learning advantages & disadvantages through internet trusted sites. As this is our (his) 2nd full on filing. Half through when started the firstone(too many amendments) $2000 a month was a bit steep at the time we dismissed.
        We do want to keep it. Rental is not going to be an investment property. We found something when the lender aggressively told us to "get out" in fear of not finding when it'd be too late.
        As we know now to never trust your lender. Sept they agreed to a short sale. However, lender filed the previous month for sheriff auction. The home is crap. The property is of husband's mother(he was 13 when she passed away) Lender says they never received any monies from the 2 n half years in bankruptcy (hard to believe). Tried to work out our mortgage and arrears with lender to no avail. Bought mobile home for 55,000. Over 80,000 is due. Sheriff Sale notice is listed for 53,000. It's hard to imagine what is exactly owed. I guess my question is do bankruptcy law allow for any home mortgage reduction? Given it's been sitting up over a year? Lender never made it known to us someone would change locks, or "maintain" the property? Not to mention threatened us out


        • #5
          You have your answer above.

          If the home is "crap", why would you even think of trying to keep it? Let it go and move on with your lives.



          • #6
            The legacy of the property is tied to the home.
            The home can eventually be replaced


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