Chapter 13 Mortgage Lien Strips.

[ValleYum]

Silly question but do we have the option of choosing which one gets stripped. The second came first, I would assume that will stay, HELOC goes. Would like to keep heloc and pay down for emergencies after ch 13 when we have the money to do so and second is a balloon with very little chance of refinancing.

I know thanks to HHM's reply that you can't choose to keep the HELOC, so that point is moot. But even if you could keep the HELOC, don't you think they could/would cut your credit line every time you reduced your principal?

IMO, an emergency fund should be cash not a credit line. A credit line is given at the whim of a creditor and is subject to decrease and that is no way to fund an emergency. For example, most credit lines granted when you first come out of bankruptcy are $1000 or less - my last-minute purchase of a plane ticket to be with my son after his accident in March was more than that.

No snarkiness or disrespect meant to you dbr. Just throwing in my POV.

[WWDMMG]

Great information! Thanks! Quick question: I found some Illinois case law that requires an individual in a 13 to file a proof of claim before the lien can be stripped. I was under the impression that you don't have to do this in AZ; that the motion was enough. Do you know of any AZ case law on point?

[justbroke]

Great information! Thanks! Quick question: I found some Illinois case law that requires an individual in a 13 to file a proof of claim before the lien can be stripped. I was under the impression that you don't have to do this in AZ; that the motion was enough. Do you know of any AZ case law on point?

Actually, I don't know of any District in which you don't need to file a proof of claim. However, you can file one on behalf of a secured creditor! I did this for two secured creditors in my case.

The reason that you need a proof of claim, is that the "claim" must be crammed down into an unsecured claim. "Des" would know more specific on procedure for Arizona. All of this "language" is in 11 USC 506 which speaks ONLY of "claims". This is why a claim is required because the judge must bifurcate or reduce the claim under 11 USC 506.

[Positive9]

Hi,
I have the same question/confusing regarding your question #2. The home has to be less than the balance taken out, NOT the balance we owed now (with all the miss payments and late fees?

If anyone can help answer this, it would be great.
Thank you

[LadyInTheRed]

Hi,
I have the same question/confusing regarding your question #2. The home has to be less than the balance taken out, NOT the balance we owed now (with all the miss payments and late fees?

If anyone can help answer this, it would be great.
Thank you

Your home must be worth less than the current balance owed on your first mortgage, including missed payments and late fees.

[Positive9]

LadyInTheRed,
Thank you very much for your respond.
I would say I have a 70/30 on my 1st/2nd- which means my home value would have to gone down about 30% for me to argue that the 2nd should be strip. The principle balance alone is probably a couple grands short of what the home is actually worth.
I have been doing EVERYTHING I can trying to keep this home, for my family. I tried loan modification for 2 years, always got declined, so finally I am so behind due to making lesser payment (while I was in the plan waiting for modification).

My question again, (forgive me for asking the same question) but I am just so nervous, the only reason/goal we would filed Ch 13 is to strip the 2nd which is a HELOC and will allow us to be able to keep the home, otherwise there's really no reason, we can try to do short sales or let it go to foreclosure... And not paying $4000 for attorney fees and other fees just to be told that the 2nd lien cannot be strip. Attorney told me, well, if the lender say no, and fight on the stripping, we can go to court and appeal (his fee is $150 an hour, and who knows how many hours I will need), and we lose in the appeal process, I have two choice, convert to 7 and walk away OR pay my 1st mortgage, 2nd mortgage, and then the monthly payment to the trustee for my arrears missed payments! I feel like whaaa? So I can be paying $4000, and end up NOT being able to stay?

Here are my questions, I am in the state of Colorado:

1) I can used the balance currently OWED right now (late payments + fees + whatever they added on) on my 1st mortgage NOT the principle balance against the current value of the house when making my case to get the 2nd lien strip?

2) Anyone here have personal success story to share regarding the 2nd lien being strip?

3) Who makes this decision? The judge? So if we come to him/her with sufficient information, proofs, he/she usually sign off?

4) Once the judge signed off, is it typical for the 2nd/3rd lender usually come after you and protest?

5) How successful is Ch 13? Are they very hard? How long from filed till the court/trustee come up with a plan or agreeing to the plan if it's prepared by my lawyer?

6) Would a lawyer take your case IF he/she knows it will never fly? Like he/she knows there was a little chance your 2nd lien would ever be stripped?

Sorry for all these questions... I'm at the end of my rope. I don't understand why the banks won't want to work with us and rather take the home back... and turn around and sell it at the price that we would easily could afford IF we had gotten it at that price...

[Positive9]

Hi lilloarin,
I know this is a late respond. But I wanted to see if I can get some update on your situation here, because it sounds the same as mine (same balances), how did you take care of the contesting?

Thank you

[Positive9]

Hey Diesel73, Congrats to you! I am awaiting my confirmation next week on Chapter 13 payment and lien strip. My 2nd lien holder is contesting. I am in CA as well and bought in 06. My first is $486,000 and second is $155,000. Was your home appraised for less than your first lien? Did your 2nd lien holder contest? Please let me know. Thanks!

Hi lilloarin,
I know this is a late respond. But I wanted to see if I can get some update on your situation here, because it sounds the same as mine (same balances), how did you take care of the contesting?

Thank you

[flhelpwith13]

New To The Forum With Balloon Payment On 2ND Mortgage

Hello all. I have a 2nd mortgage with a balloon due in 12/11. I will be filing soon and will not be able to pay the balloon of $80,000.00 (Obviously, or I may not be going through the BK process). The value of the home is slightly higher than the balance on the first so I know a strip is not going to happen. My attorney says she will try to mediate a fixed modification to the loan but there is no guarantee and between mediation and her fees, it's approx. $1200.00 extra. I have a good relationship with the 2nd mortgage holder through the company I work for. Should I try to negotiate with them on my own and let them know my situation and see if they can do anything for me without going through a mediation? I would run any deal by my attorney of course before closing it. Would it be wise to let them think there is a chance of stripping it out? Thanks in advance for any input.

[Curly]

Great information. Currently in a BK 13 plan. I have a first and a second mortgage. If we are successful with a strip down of the second could we then turn around and sell the house on a short sale?

[indeep59]

Have a question regarding these "lien strips" in a 13.
I filed Ch 7 and was successful last July. My loans for this home were discharged. I was single at the time. I continued to make the payments though (had a modification) and did not reaffirm. However, due to being unemployed for a while late last year and early this year I fell behind in my payments. I subsequently got married a few months ago, and my bank has started foreclosure proceedings against me, and am now in pre-foreclosure. However, someone suggested doing a Ch 13 to perhaps keep the home and get rid of the second. Is that even possible?

I'm only entertaining the idea because my new bride loves the home and wants to help me with it. However we don't have funds to catch up but can afford the place now on a monthly basis,where I couldn't before by myself obviously.
3 tries at another mod have fallen on deaf ears, would this be a good strategy to try and keep the home without a second lien? First mortgage is aprrox 430,000,second is 132k, value of home is prob around 430k.
Any thoughts?

[HHM]

Have a question regarding these "lien strips" in a 13.
I filed Ch 7 and was successful last July. My loans for this home were discharged. I was single at the time. I continued to make the payments though (had a modification) and did not reaffirm. However, due to being unemployed for a while late last year and early this year I fell behind in my payments. I subsequently got married a few months ago, and my bank has started foreclosure proceedings against me, and am now in pre-foreclosure. However, someone suggested doing a Ch 13 to perhaps keep the home and get rid of the second. Is that even possible?

I'm only entertaining the idea because my new bride loves the home and wants to help me with it. However we don't have funds to catch up but can afford the place now on a monthly basis,where I couldn't before by myself obviously.
3 tries at another mod have fallen on deaf ears, would this be a good strategy to try and keep the home without a second lien? First mortgage is aprrox 430,000,second is 132k, value of home is prob around 430k.
Any thoughts?

"Possible" is the key word. Courts are VERY split over the issue. If you filed chap 7 that recently, then you would have a non-dischargeable chapter 13 bankruptcy.
The general rule is, you COULD file the 13 to save the home and pay the mortgage arrears, but you would not be able to strip the 2nd (because it is a non-dischargeable 13).
However, some courts hold that if the chapter 13 is filed in good faith (read, for some other reason than just stripping the 2nd mortgage), you CAN strip the 2nd in a non-dischargeable 13.

However, the majority opinion seems to be no 2nd mortgage stripping in a non-dischargeable chapter 13. You must wait 4 years from the filing of your chapter 7 to have a dischargeable 13.

[azmom]

And another question. I am 33 months in to a 60 month Chap 13. At the time of filing, my house was worth more then the 1st and 2nd. Now it is worth about 20% less then the 1st. (AZ) Can I modify the BK and strip the 2nd? Want to downsize and get out but really tied up for now. If I could short sell, would it goof up the BK? Thanks.

[justbroke]

And another question. I am 33 months in to a 60 month Chap 13. At the time of filing, my house was worth more then the 1st and 2nd. Now it is worth about 20% less then the 1st. (AZ) Can I modify the BK and strip the 2nd? Want to downsize and get out but really tied up for now. If I could short sell, would it goof up the BK? Thanks.

No. The value of the property is set at the time that your case was started (filing of the petition).

[HHM]

8th circuit court of appeal just ruled in Fisette v. Keller that you CAN do 2nd mortgage line strips in non-dischargeable chapter 13's.

That is the highest court to rule on the issue directly that I am aware.