Chapter 11 - all unsecured?

[elster]

Filed Ch13 and tried to surrender home in full satisfaction of debt; mortgage company is objecting - they want a cut of the plan payments.

The amount of unsecured would be about 400k+, too much for Ch13.

Do people really do CH11 with all debt unsecured? I don't I can stay in Ch13 with this amount....


I am concerned about the expenses and how long Ch11 would last..

[HHM]

Well, how confident are you that you are that negative on the home such that you would now exceed the unsecured debt limit?

When it comes to the unsecured debt limit, you can still "file" the 13 and see if anyone objects to the plan based on the debt limit issue. If no one objects and your plan gets confirmed, then you are in the clear.

Usually, these types of cases actually end up as a chapter 7, any particular reason you are not doing a 7 and simply walking away?

[elster]

house balance is 850k, house mkt value is 468k (zillow.com).
CC debt is 72k.

So I am way over the Ch13 limits.

1st mortgage creditor is balking about my trying to surrender house in full satisfaction. I tried a 100% plan to payback CC debt, and just surrender house in full satisfaction.

Don't see how I can make their objection just disappear. The deficiency is massive (was a consolidation refi at the height of the house value).

Tried Ch7 but UST was being very hard on me. I passed means test when including mortgage payments, but they argued 707b3 (totality of circumstances). Would be nice if I could do 7 because I can't do Ch13 due to unsecured debt being so high.

All my debt is unsecured at this point...kind of not sure where this is going ...attorney is going to advise me soon

[imaloser]

wow

hang in there, elster ! ! ! can't offer any guidance - i'll leave it to the pros.

[catleg]

I am confused...the lien has not been stripped, therefore the mortgage is fully secured. In other words, I think the debt limit is only on debt that appears on your schedules as unsecured. Is the lender going to cram down their own loan? That would probably be a first.

Would you keep the house if the loans got crammed down to the appraisal?

[justbroke]

As HHM points out, if no one complains and raises an 11 USC 109(e) exception (limits), why not still try?

See my blog, I had that specific issue.

However, my total scheduled unsecured debt was over $190,000. When I stripped my second and did a cramdown on two cars, BestCase and my spreadsheet showed me at $365,000 in unsecured debt!!!

I was scared, and thought I'd be pushed into a Chapter 11. Anyhow, a good number of creditors didn't file, and the court goes by your schedules. There are cases where the Court uses its discretion to look beyond the schedules, but most just look at the schedules.

The reason why is that Rule 1001 basically wants quick adjudication of cases. In several cases addressing this issue, Courts have continued to agree that a debtor shouldn't get 4-5 months into a petition, only to find s/he doesn't qualify because of a 109(e) exception.

Also, the stripped second lien's value may be considered "unliquidated" because it is necessary to have file a contested matter or an adversarial proceeding to determine it. Therefore, it doesn't count has "undisputed" and "liquidated" which is one of the terms to make it fit the 109(e) exception.

Yes, I looked into this alot! I was praying for days. It was a non-issue even after my strip put me $30K over the 109(e) exception for unsecured debt.

Here's another word I learned and now love... res judicata. That's right! Once your plan is confirmed, no one can complain about the 11 USC 109(e) debt limits!!!

[catleg]

justbroke has a good point about unliquidated. I saw a chapter 13 case in Pacer which had way over 336900 in unsecured debt on the schedule, trustee objected, but was satisfied because most of the debts were contingent. The
guy had guarantees on business debt but it hadn't defaulted.

[justbroke]

justbroke has a good point about unliquidated. I saw a chapter 13 case in Pacer which had way over 336900 in unsecured debt on the schedule, trustee objected, but was satisfied because most of the debts were contingent. The
guy had guarantees on business debt but it hadn't defaulted.

Exactly! And, as you can see, most just go by the forms. However, the debt must be non-contingent, undisputed and liquidated to count against you.

[elster]

[HHM]

Well, the mortgage company is correct. You cannot surrender in "full satisfaction" if your schedules in fact bifricate the claim, have a secured and unsecured portion of the claim, then you MUST account for the unsecured portion. There really are no legal grounds for treating the unsecured claim of the mortgage company differently than your other unsecured claims.

What you did is a common mistake. In order to surrender the house "in full satisfaction" in a chapter 13, you must LIST the value of the home as equal to the balance owed on the mortgage. Then the burden is on the creditor to come in an dispute the value. (which they very well might, but there is less of a chance...but, there is also the issue of whether you have a good faith basis for valuing the home that high if it really is terribly upside down).

Sounds like you and your attorney rolled the dice, and it came up craps on this. Unless your attorney is willing to go before the judge with an argument, simply amend your plan to provide payment and be done with it.

[justbroke]

Exactly what HHM wrote, about the Objection to Confirmation of Plan. However, i don't think I would have filed a good faith objection.. they had enough just on the deficiency claim.

I did surrender one home in full satisfaction, but the underlying debt was oversecured by the property (by very little, with about 4% equity). Plus I didn't want to deal with a 100% plan if I kept it anyhow (my rental property).

Don't fret. Many lawyers put "surrendered in full satisfaction of claim" in the Plans. I did this myself. I didn't get an objection. However, when you're in a 100% plan... that's money on the table, and no creditor is going to let others get a piece of that. Especially since mortgage claims are much higher than credit card claims, so they'd get a more significant piece of that 100%.

It really doesn't affect you or your plan payment. Your payment is the same. It's just that the lender would receive a pro rata distribution from the unsecured pool.

[elster]

I didn't list the market value of the house on the schedules though...it is listing this way in zillow.com - but my schedules don't attempt to place a value on the house.

In the case I am just trying to surrender in full satisfaction - but I know the market value of the house would not be what is owed on it. So my plan did not bifurcate the 1st mortgage...

Elster

[elster]

The lender's argument seems to say to wait for the house sale to determine their deficiency and then make payment to them for it...which seems to say "let's put your case on the back burner, wait for a sale, figure this all out, then pay us some of the deficiency".

They hadn't even bothered to prepare the house for sale even though I handed it over way back last summer.

Trying to stay in 100% plan in CC debt so future income doesn't have to go to the UST. Due to the amounts involved, if the unsecured were determine to be what I think it is, I am in too much unsecured debt for Ch13.

Elster

[justbroke]

The lender's argument seems to say to wait for the house sale to determine their deficiency and then make payment to them for it...which seems to say "let's put your case on the back burner, wait for a sale, figure this all out, then pay us some of the deficiency".

Actually, it's not an argument and it doesn't work that way. What the lender does (and probably already did) is to file a claim for both a secured amount and a potential unsecured amount. Some smart lenders will file all but $1.00 as secured and the $1 as unsecured with a note stating that they have the right to amend the claim for any deficiency once the property is disposed of.

They can wait a reasonable amount of time before amending their claim. Any claim can be amended, so long as it's truly an amendment and not a new claim.

They hadn't even bothered to prepare the house for sale even though I handed it over way back last summer.

Doesn't matter.

Trying to stay in 100% plan in CC debt so future income doesn't have to go to the UST. Due to the amounts involved, if the unsecured were determine to be what I think it is, I am in too much unsecured debt for Ch13.

Well, you aren't in too much. Almost all courts go by your schedules, so don't worry about the 2nd mortgage or the 1st mortgage filing a deficiency claim. That's known as "contingent" and/or "unliquidated" debt, and doesn't count against you for the 11 USC 109(e) limits.

[HHM]

I didn't list the market value of the house on the schedules though...it is listing this way in zillow.com - but my schedules don't attempt to place a value on the house.

In the case I am just trying to surrender in full satisfaction - but I know the market value of the house would not be what is owed on it. So my plan did not bifurcate the 1st mortgage...

Elster

What did you list on schedule A...go back through your schedules, you are required to list a value of the real estate on schedule A (or perhaps you put Unknown).