Chapter 13 Mortgage Lien Strips.

[HHM]

You might not be able to just "drop" the 13. The Goal of BK is a discharge, and you NEED to get a discharge one way or the other.

So, you have 2 options.
1. If your new income will allow, convert to chapter 7, surrender home, and get your BK discharge.
2. Stay in chapter 13, modify your plan to surrender house, and adjust payment accordingly.

Just simply dismissing your case is probably a bad idea. If you do, the debts become alive, and when the house eventually forecloses, you may be responsible for the difference. As such, your goal right now is to figure out how to get to your BK discharge in the least costly way as possible.

[ms67]

Got a Lien Strip - Now might be moving

We are in Maryland, filed a 13 to catch up on arrears on 1st and strip 2nd. No objection from 2nd. House was appraised at 250k. owe approx 375k on 1st. 2nd that was stripped was 84k.
Have a possible job opportunity out of state. would have to move (and rent). Can I drop the 13 and let the 1st have the house? What happens to the 2nd?

Majority of the 13 is the arrears - only a couple of other small debts that I could cure.

Thanks,

[justbroke]

Anyone can determine the price. You or I could come up with a price. However, is that best evidence? The more experienced and licensed an appraiser is, the best his/her "expert" testimony would suffice in a trial in court. An appraisal on the Uniform Residential Appraisal Report (URAR) form with the necessary license information trumps a BPO, a CMA, and Zillow anyday of the week. In court the sworn testimony of the most reliable witness is usually the best evidence.

My personal opinion is that if you're going to do a lien strip, then get a full appraisal performed by a licensed appraiser (for your State) and on form URAR. When you present Zillow and other valuations (including BPOs, CMAs and even property tax assessments) they almost always will be challenged. An appraisal sets the bar short of testimony of a licensed professional in court.

I think it's worth the $250-400 for the appraisal for a lien strip. Some people will use a CMA (comparative market analysis from a realtor) for an initial estimate, but submit a URAR as evidence (attached as an exhibit) to the lien strip request.

[Lajazz947]

Who actually determines my home value? Broker opinion or appraiser or both?

If I used Zillow my house is worth more than my first. House done the block a little smaller sold for much less.

House across the street , missed 34 payments, on short sale , little bigger but nicer, worth much more than mine.

Who knows what house is worth but with so many different values and choices what can I expect?

Thanks,

[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.

[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).

[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.

[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.

[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?

[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?

[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.

[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

[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]

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...

[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.