Chapter 13 Mortgage Lien Strips.

[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

[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.

[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?

[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.

[HHM]

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.

Nope, it is based on order of priority. The 1st is superior to the 2nd, the 2nd superior to the HELOC.

The rule is, the house cannot be worth more than the superior mortgage(s).

http://methnerlaw.com/2011/05/15/2nd-mortgage-lien-strips-it%E2%80%99s-all-or-nothing-in-chapter-13-bankruptcy/

[dbr]

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.

[HHM]

Question: We have the following scenario:

First Mortgage - $227,500
Second Mortgage - $57,000
HELOC - $28,000

Total Value is $250,000

Can the Second or the HELOC be stripped due to the fact that one of them is totally unsecured? We asked our attorney (paralegal) and she had never seen a situation like this and said she will have to look into it. This would be in Missouri, we have asked about stripping one of them, not both, just one.

HELOC yes, second mortgage, no. If the house is really worth $250K, then the 2nd mortgage has some equity touching it and nothing can be done.

In chapter 13, lien strips are all or nothing. The inferior liens are either have zero secured value, as in the case of your HELOC, or secured value. If there is so much as 1$ of secured value, then the entire second mortgage sticks (all or nothing).

[dbr]

Question: We have the following scenario:

First Mortgage - $227,500
Second Mortgage - $57,000
HELOC - $28,000

Total Value is $250,000

Can the Second or the HELOC be stripped due to the fact that one of them is totally unsecured? We asked our attorney (paralegal) and she had never seen a situation like this and said she will have to look into it. This would be in Missouri, we have asked about stripping one of them, not both, just one.

[justbroke]

We are able to make the payment because the home we have now, we used retirement funds to pay for, so no mortgage payment. The electric is cheaper, etc. I wonder why the BK attorney did not see this as a problem.? She said as long as the mortgage is current, it is not a problem. hmmmm

Unless the Trustee is sleeping and it goes to Confirmation as-is, I just don't see how it works. I don't know why a Trustee would allow you to keep a "second home" and include the expense for that, to the detriment of unsecured creditors. If you're in a 100% payback plan, then my concerns are moot.

There is just too much math to explain, but if the allowance for a home in your part of Florida is less than the total cost of ownership of the deserted home, then I don't see it being feasible.

Can you explain to me, again, why you even want the headache of renting it???

[LoveMySinbad]

We are able to make the payment because the home we have now, we used retirement funds to pay for, so no mortgage payment. The electric is cheaper, etc. I wonder why the BK attorney did not see this as a problem.? She said as long as the mortgage is current, it is not a problem. hmmmm

[justbroke]

I can tell you that the Florida Middle District Chapter 13 Trustees will not allow an expense for a home that you are not living in! How do you plan to make the payments? If you do rent it out, the payments needs to not only cover the PITI (principle, interest, taxes and insurance), but also any homeowner fees, cost to maintain, and all other costs (such as real estate management, unexpected expenses, empty home, etc).

What I did was MOVE BACK IN to my home!

[LoveMySinbad]

Newbie here with Question regarding Ch 13 Lien Strip

I am in Florida. We just got off a conference call with BK attorney and we think we are heading to chapter 13 for main purpose of lien stripping 2nd. Question, the home we have the 2nd on we recently vacated about 3 months ago, we were planning to rent it out, but as of yet do not have a tenant. We successfully modified the first with a HAMP modification. This has been our primary residence since 2001 and we just didn't need the huge home anymore and it was costing too much to live there, electric, etc.

This home is still classified as our primary residence and has been for over 10 years.Should we not put a tenant in there until we get through with this chapter 13? The attorney did not seem to care about this situation, but I thought I'd ask here.

[justbroke]

New decision out of Colorado, In re waterman, that allows a 2nd mortgage lien strip in a non-dischargeable chapter 13 bankruptcy.

That is really great news!

BTW, is it my eyes, or did the Judge literally just give them the house?

IT IS ORDERED that the Motion to Determine Secured Status Pursuant to 11 U.S.C. §506 filed on November 9, 2010 (Docket #22) is GRANTED and the Residence is determined to be fully unsecured.

[HHM]

New decision out of Colorado, In re waterman, that allows a 2nd mortgage lien strip in a non-dischargeable chapter 13 bankruptcy.

[PhillyBKLaw]

It's based on the value of your home on the date of filing.