Deficiency Mortgage Unsecured and When

[dovette7]

We surrendered our home in Ch 13. 1st mortgage Wells Fargo and 2nd with Wachovia. We are in an 80% plan. The Motion to Lift Stay was granted in April to both lenders on the house. There was a short sale offer in Sept 07..the 1st mortgage who had started foreclosure proceding put them on hold and began talks with the buyers agent. I have heard nothing from the 2nd mortgage ever.
We are waiting to see what becomes of all this. I filed bankruptcy Feb 15, 2007 and the house has been sitting ever since.

Both lenders filed secured claims. Here are some questions if you guys can help.

1. On National Data Center, the 1st Mortgage shows with the correct claim amount...and Principal Owed: $0. The 2nd mortgage shows Principal Owed: Amount equal to 80% of Balance. I know that a deficiency will become unsecured, however the house hasn't been sold or foreclosed or anything. I don't know if this is an error or ?? Do they have to amend the claim once the house is auctioned or sold?

2. If the short sale goes through... isn't there a way to put in the contract that I wouldn't be responsible for any deficency balances... that way they couldn't refile a claim for the difference?

I know that it would be unsecured, but my husband works out of state and comes home every 4-5 weeks in order for us to make this plan work. I do not work.. but am thinking about going back to work in order to try and pay this off quicker. I know we will then go to 100% plan but it would still be quicker unless.... we have to pay back that 2nd mortage. Then there is no way.

Any thoughts?

[HHM]

WTF are you doing a short sale during a chapter 13. You realize, at this point, there is absolutely no benefit for you to doing a short sale. In fact, by doing a short sale, you have potentially exposed yourself to significant income tax liability on the difference between what is owed on the house and the amount paid in the sale. (unless you qualify as insolvent, see IRS form 982 and the associated publication). If you do not qualify as insolvent, you CANNOT now add that tax liability into your chapter 13.

[dovette7]

I don't even know what to say! My attorney was aware of the short sale offer and in fact since I didn't know what I was doing, I directed the agent to talk to my attorney. I will call him Monday. Thanks for bringing that to my attention. All I know is that the banks didn't foreclose yet because there was a short sale on the table and I was trying to be cooperative with the agent.
So now I'm very confused but Thanks for the heads up before it's to late for me!

So now back to them foreclose. It has been almost a year since Motion to Lift Stay was granted. Can the lenders now come back and amend the secured claim to unsecured?

[busbis]

I would imagine the property would have to be foreclosed first. Then once foreclosed they can ammend the claim (but I think before filing the amended claim they would have to take steps to prove the definciency bal, in FL I know they actually have to file suit and have the judge order the def bal).