Investment Home or Vacation Home Mortgage Modification OUTSIDE Plan

[simon2020]

Hi All -- ok I know I have asked previously about modifying my investment home and the topic of modifying that mortgage, but here is my next question:

1. I understand second homes/vacation homes/investment type properties mortgages can be modified when I file Chapter 13. The current law, as we all know does not let a homeowner modify their "primary" residence where they live. That I totally understand.

2. I understand my Trusteee will be paid a percentage of the plan for his/her services per month to administer the plan for me.

3. An attorney I met with said to me "Keep your mortgage outside of the plan" so that I don't pay unecessary additional fees to the trustee. I agree 100% on that advice.

Since I don't want the investment property mortgage in the plan AND I want to modify the loan because I have a ARM on that loan which is resetting "higher" on 5/1/09 (I'll be filed by then with the BK courts), I want to ask the judge to help me work with the bank to modify the loan terms (interest, months to pay, etc.) WHATEVER IT TAKES TO SQUEEZE OUT MORE DISPOSABLE INCOME to help pay for the plan.

Just to let everyone know, I will be in a 100% plan because my attorney said if I want to keep the property and there is some equity in it, then he can't file a Ch 7 but rather a CH 13 and I MUST PAY 100% to avoid liquidation of this property which I want to avoid.

Question: Do I have to have this investment property mortgage in the plan even if the judge/trustee dukes it out with the mortgage company to modify my loan OR can they still help me and I will be given the option to then pay on the new terms but OUTSIDE Of the plan?

Link re investment homes and modification: http://mcleodlawoffices.com/2008/10/...ptcy_laws.html

[simon2020]

.
Surely, there must be a smart guy/gal out there who can comment on my thread.

[Trixie007]

I want to ask the judge to help me work with the bank to modify the loan terms (interest, months to pay, etc.) WHATEVER IT TAKES TO SQUEEZE OUT MORE DISPOSABLE INCOME to help pay for the plan.

I didn't realize that the judge would do this for you... Maybe someone more knowledgeable will come along.

Oops! I just saw that you wanted a "smart guy/gal" to comment - sorry LOL.

[simon2020]

Trixie - yes, a second home can be modified within a ch 13 plan. It's not my regular residence. By the way you have a cool name!

[HHM]

The whole inside/outside thing is a non issue. Every payment you make to a creditor, whether by the Bk trustee, or by yourself is "part of the plan". Realize, you won't really be able to modify the interst rate in a meaningful way on the 2nd home, only adjust the principal to its secured and unsecured portion.

[simon2020]

.

HHM The whole inside/outside thing is a non issue. Every payment you make to a creditor, whether by the Bk trustee, or by yourself is "part of the plan". Realize, you won't really be able to modify the interst rate in a meaningful way on the 2nd home, only adjust the principal to its secured and unsecured portion.

HHM -- so what you're saying is my attorney could ask the bk courts to "possibly" change my interest rate from an ARM to a Fixed rate?

And what did you mean ". . . only adjust the principal to its secured and unsecured portion."

Here's my stats on the home:

Loan = $297,000
Home Value (estimate) $400,000
ARM = 7.125% fixed for 36 months
Reset 4/1/09 = Libor 6 months 6.75 + index at reset

Could you please give me an example using my stats above on what could happen during my Chapter 13 process?

Thank you.

[HHM]

HHM -- so what you're saying is my attorney could ask the bk courts to "possibly" change my interest rate from an ARM to a Fixed rate?

Umm, I thought I said the exact opposite (ok, perhaps I wasn't as direct as I needed to be). The answer is no, the BK court does not go in and modify the interest rate and related terms, UNLESS you can PAYOFF the note within the 60 months of the chapter 13 plan.

only adjust the principal to its secured and unsecured portion.

If the house is upside down, i.e. negative equity, then you can modify the loan and reduce the lien (and the principal) to the current market value of the loan.

With those stats, the BK court can't do anything (unless you have the means to pay off the note within 60 months).

[bkause]

I am in this exact position with my investment property. Maybe you could answer this question?

In 2008 we lost 1/2 of our income and had to Short Sale our Primary. Our credit is shot so we moved in to our rental house. It is 736 sqft for a 3 person family. We have lived here 6 months and we are ready to look for a larger home to rent, and again rent this property.

Our property is worth $200,000 and we owe $450,000. When my husband starts working again we will be able to afford the payoff in 5 years between the rental income and our combined income.

Will we have a problem since we temporarily lived in our investment property? We have filed this property as an investment for the last 3 years.

[CH33 Paralegal]

"Vacation Home" and "Bankruptcy" should NEVER be used in the same sentence, unless the sentence is like "I'm going to take advantage of what the bankruptcy offers and SURRENDER my VACATION HOME"