Chapter 13 Mortgage Lien Strips.

[Pandora]

Some Districts require what is known as adequate protection payments in order to keep the junior lienholder's from losing equity (depreciation affects) while the motion to value and lien strip is being heard. If your District does this by Complaint (in an Adversary Proceeding (AP)), then it is much more likely that adequate protection will be required. However, adequate protection is usually not the entire mortgage payment.

I will also say that in some Districts, the lienholder will file a motion titled "Motion for Relief From Automatic Stay or Adequate Protection" meaning that they want to foreclose, or want adequate protection in the interim. I'm surprised that more courts don't allow this practice, but here in Florida, we can value/strip by Motion (contested matter) and don't need the long drawn out adversary proceeding (trial) process.

Thanks Justbroke - NOW it makes more sense I knew there had to be some sort of weird explanation LOL

man - glad our district doesnt require that

[justbroke]

Ok...maybe I'm not understanding something so indulge me. Why on earth are you paying your 2nd mortgage if you're in a Ch. 13 and trying to strip the 2nd off? How on earth can your 2nd even proceed with foreclosure when you're in active BK - and the stays are in place?

Some Districts require what is known as adequate protection payments in order to keep the junior lienholder's from losing equity (depreciation affects) while the motion to value and lien strip is being heard. If your District does this by Complaint (in an Adversary Proceeding (AP)), then it is much more likely that adequate protection will be required. However, adequate protection is usually not the entire mortgage payment.

I will also say that in some Districts, the lienholder will file a motion titled "Motion for Relief From Automatic Stay or Adequate Protection" meaning that they want to foreclose, or want adequate protection in the interim. I'm surprised that more courts don't allow this practice, but here in Florida, we can value/strip by Motion (contested matter) and don't need the long drawn out adversary proceeding (trial) process.

[Gage35]

Make 2nd mortgage payments prior to strip in Chapt 13

Ok...maybe I'm not understanding something so indulge me. Why on earth are you paying your 2nd mortgage if you're in a Ch. 13 and trying to strip the 2nd off? How on earth can your 2nd even proceed with foreclosure when you're in active BK - and the stays are in place?

We havent paid our 2nd in almost a year (next month will be 1 year) and are stripping the 2nd. Our 1st is being paid outside the plan. If my attorney told us to pay one dime to our 2nd while in BK... I'd have to wonder why when thats the reason we filed to begin with.

Baffled here.

I'm baffled also when atty said to start paying 2nd that will be stripped. I believe atty's thought is so 2nd will not file anything that will costs us money for him to deal with.

I'm glad the BK forum is here to hear of others similar situations and how they are proceeding. Glad to hear your comments.

We did not want to continue to pay it - thought it was a waste of our money - not that we had the money to pay it anyway. Screw it.

[smkrishna]

Ok...maybe I'm not understanding something so indulge me. Why on earth are you paying your 2nd mortgage if you're in a Ch. 13 and trying to strip the 2nd off? How on earth can your 2nd even proceed with foreclosure when you're in active BK - and the stays are in place?

We havent paid our 2nd in almost a year (next month will be 1 year) and are stripping the 2nd. Our 1st is being paid outside the plan. If my attorney told us to pay one dime to our 2nd while in BK... I'd have to wonder why when thats the reason we filed to begin with.

Baffled here.

I totally agree with Pandora on this.

But, for people who haven't filed Ch.13 yet (like me), some attorneys might want to take the safer route by asking their clients to pay the 2nd before filing for Ch.13 so that there is no foreclosure proceedings. But, again, my attorney never asked me to pay 2nd as I am planning to go for Ch.13 either next month or so. I am also pinning my hope to strip the 2nd lien on my primary home.

[Pandora]

Atty told us to start making 2nd mortgage payments again when we filed last month so the lien holder would not start foreclosure proceedings - we made one payment so far. Our prior payment was summer 2009 (we made a total of 3 payments in 2009) and no foreclosure action has been initiated by the 2nd lien holder at any time. Atty wants us to continue to make payments (ugh) until confirmation in a couple months. There is no value the 2nd can attach to in the home. What do you mean by "preference actions?"

Ok...maybe I'm not understanding something so indulge me. Why on earth are you paying your 2nd mortgage if you're in a Ch. 13 and trying to strip the 2nd off? How on earth can your 2nd even proceed with foreclosure when you're in active BK - and the stays are in place?

We havent paid our 2nd in almost a year (next month will be 1 year) and are stripping the 2nd. Our 1st is being paid outside the plan. If my attorney told us to pay one dime to our 2nd while in BK... I'd have to wonder why when thats the reason we filed to begin with.

Baffled here.

[Gage35]

Stop making 2nd mortgage payments while awaiting Confirmation

In the worst case, it appears this may be a case where the 2nd attaches to some value but the value is too small for the 2nd to economically justify foreclosure - basically a financial purgatory. If there is no value that the 2nd can attach to and it is therefore stripped, would it be possible to recover recent payments by way of preference actions?

Atty told us to start making 2nd mortgage payments again when we filed last month so the lien holder would not start foreclosure proceedings - we made one payment so far. Our prior payment was summer 2009 (we made a total of 3 payments in 2009) and no foreclosure action has been initiated by the 2nd lien holder at any time. Atty wants us to continue to make payments (ugh) until confirmation in a couple months. There is no value the 2nd can attach to in the home. What do you mean by "preference actions?"

[iv65536]

The above was a reply to QUOTE: When performing a lien strip on a 2nd mortgage of a principal residence, are you required to make adequate protection payments until the final confirmation or can you stop making payments assuming that you will be stripping the lien? QUOTE

WE ARE CURRENTLY IN THIS SITUATION. Attorney said to keep making 2nd payments which is just throwing money away as there is no doubt that 2nd will be stripped. Has anyone else recently stopped making 2nd mortgage payments in this situation?

In the worst case, it appears this may be a case where the 2nd attaches to some value but the value is too small for the 2nd to economically justify foreclosure - basically a financial purgatory. If there is no value that the 2nd can attach to and it is therefore stripped, would it be possible to recover recent payments by way of preference actions?

[Gage35]

Stop making 2nd mortgage payments awaiting confirmation hrg

You only need adequate protection on things you're keeping. On the outset, it would seem that you should make adequate protection payments on the 2nd, but it is unsecured.
Adequate protection isn't going to help the 2nd lienholder. Therefore, you do not need to make adequate protection payments on the 2nd that is wholly unsecured.

The worse the 2nd could do is file a Motion For Relief from the Automatic Stay (MFS) seeking relief or adequate protection. That would be negated, of course, by your stripping of the 2nd mortgage. I had this same scenario where I stripped the 2nd and "paid" the first in Plan. Never heard a peep from the 2nd... not even on the motion to stip!

The above was a reply to QUOTE: When performing a lien strip on a 2nd mortgage of a principal residence, are you required to make adequate protection payments until the final confirmation or can you stop making payments assuming that you will be stripping the lien? QUOTE

WE ARE CURRENTLY IN THIS SITUATION. Attorney said to keep making 2nd payments which is just throwing money away as there is no doubt that 2nd will be stripped. Has anyone else recently stopped making 2nd mortgage payments in this situation?

[yellowstone]

this isn't exactly a lien strip situation, but our bank is willing to modify our loan to drastically reduce the interest - from 7.5% to 3.% for 5 years than 4.5% for another 35 years.

We filed for a 7 indicating that we would surrender the house, but the bank never foreclosed. We moved out about a year ago. We don't want to move back if there is a chance the bank could pull the rug out from under the modification, so the idea of getting a court to approve the deal is highly appealing.

I'm a little unclear on whether it would be better to do a reaffirmation agreement in the 7, or whether we should convert to a 13. I'm certain that our projected disposable income in the 13 would be zero, so I'm not sure if that is an option, however.

[HHM]

Hi all, first post been reading for a while though.

I have read where it states that if your home is worth less than what you owe on your first it can be lien stripped (of the second)? I understand that, however if you get a current market analysis and everything says your home is worth less than your first yet the bank argues and states its worth more. How is that figured out? Who determines that? What happens? Our house is worth less than the amount owed on the first, but its close, any help would be greatly appreciated.

example: 1st mortgage is $215,000
Current Market Analysis states value is $210,000
Bank says worth $225,000 (2nd at $65,000)

Thank You!

If the two sides disagree, you go before the BK judge, call your respective witnesses to testify, and the judge decides.

2nd mortgage lenders are getting a little more aggressive about defending these, but a negotiated resolution can be had. Especially if the option exists to convert to a chapter 7. It really depends on how creative your attorney is (unfortunately, most BK attorneys are not that creative).

[smkrishna]

dustin2471, did your bank (who holds the second mortgage) create this issue for you? I haven't yet filed Ch.13. But, main reason for my Ch.13 is to strip the second lien on my primary home. I am waiting for the home prices to drop down further to file for Ch.13. I am scared of situation similar to what you stated as my primary loan is $218k and it looks like Appraisal will come close to that amount. I am waiting for reply from experts in this forum to give us a solution.

[dustin2471]

CH 13 lien strip question

Hi all, first post been reading for a while though.

I have read where it states that if your home is worth less than what you owe on your first it can be lien stripped (of the second)? I understand that, however if you get a current market analysis and everything says your home is worth less than your first yet the bank argues and states its worth more. How is that figured out? Who determines that? What happens? Our house is worth less than the amount owed on the first, but its close, any help would be greatly appreciated.

example: 1st mortgage is $215,000
Current Market Analysis states value is $210,000
Bank says worth $225,000 (2nd at $65,000)

Thank You!

[tigergem]

I don't know about that, as I haven't read any such thing.

Yeah, I'm pretty sure I did see that. Couldn't say offhand exactly where though. Something to the effect of them getting overwhelmed with spam reports.

[justbroke]

Huh. I thought we weren't supposed to report those things.

I don't know about that, as I haven't read any such thing.

[tigergem]

Huh. I thought we weren't supposed to report those things. I thought I read somewhere that the mods are omnipotent and will catch them without us reporting.