Lean Stripping

[boz]

Anyone have advice. I have 2 mortgages. 1st 240000 2nd 73000. My home now is probably worth about 270000 I am thinking about bankruptcy chapater 13. I haven't paid my mortgage in 8 months due to job loss and I'm sure I will be going in foreclosure soon. I don't want to loose my house. I have to kids.

[justbroke]

You can not lien strip in that scenario. The Value of your home would have to be less than the balance on your first mortgage.

HHM wrote an excellent review here... https://www.bkforum.com/node/32398

[pcn]

To lien strip the value of the home must be less than the 1st mortgage. There are several good threads about lien stips, plus a stickie at the top of the page. Also, do a search on "ch7 lien strip" or "settlement". Those are alternate methods to use if you go the ch7 route. (there is no legal lien strip in a ch7, but the method is called that in some posts)

[walkthaplank]

Where are you getting the value of your home, it may very well be worth less than your first, but you need a proper appraisal to know.

[cahomeowner]

lien stripping

I have been to several BK attorneys. who is saying that the value of the home has to be less than the 1st to qualify to strip the 2nd?

the lien is secured by the value of the home. I have not seen anywhere where it indicates the value has to be less than the 1st?

[justbroke]

I have been to several BK attorneys. who is saying that the value of the home has to be less than the 1st to qualify to strip the 2nd?

Yes it does.

the lien is secured by the value of the home. I have not seen anywhere where it indicates the value has to be less than the 1st?

It's an interpretation of the Bankruptcy Code that has gone through a lot of litigation. The code reads that a secuerd claim is only a "secured claim to the extent of the value

[cahomeowner]

lien stripping clarification

so I have 3 loans on my primary:

$500K
$150K
$100K

values range as low as $479K - $617K. obviously I am hoping the values come in or under 500K so I can strip off the 2nd and 3rd.

don't you think the lenders would do their own appraisals in a bankruptcy case and don't you think those numbers are going to come in as high as possible to avoid the potential of lien stripping? as least that is my thinking if I was on the lender side.

in any case I am planning on filing chapter 13 and having the BK lawyer attempt to strip the 2nd & 3rd. if a loan is only secure up to the value of the property it's strange that you are not able to do a partial strip of the 2nd or 3rd mortgages? I realize it's an all or none type proposition...in cases where people are right on the border I would think the bank would submit their own appraisal as to avoid the lien strip.

anyone have experience around this?

[justbroke]

don't you think the lenders would do their own appraisals in a bankruptcy case and don't you think those numbers are going to come in as high as possible to avoid the potential of lien stripping? as least that is my thinking if I was on the lender side.

Many times, the lenders only do a Broker Price Opinion (BPO) which is not even a godo value to use. A Comparative Market Analysis (CMA) prepared by a Realtor who has personally inspected the interior and exterior of the home would have higher weight. An full appraisal performed by a licensed appraiser has the most weight. Lenders usually don't fight an appraisal, but have been known to disagree with a CMA and BPO and other valuation methods including, but not limited to, the tax assessed value.

in any case I am planning on filing chapter 13 and having the BK lawyer attempt to strip the 2nd & 3rd. if a loan is only secure up to the value of the property it's strange that you are not able to do a partial strip of the 2nd or 3rd mortgages? I realize it's an all or none type proposition...in cases where people are right on the border I would think the bank would submit their own appraisal as to avoid the lien strip.

You can't do a "partial" strip -- on a primary residence -- because that's called a cramdown... not a strip. For primary residences, the bankruptcy code provides protection that they may not be modified (11 USC 1322). However, the code reads in such a way that it has to be an allowed secured claim and secured claims must have at least some value in the property securing them. So, if it's your primary residence, you are not going to be able to "cramdown" the value if the lien is "partially" secured.

I have lots of experience in this area.

[walkthaplank]

so I have 3 loans on my primary:

$500K
$150K
$100K

values range as low as $479K - $617K. obviously I am hoping the values come in or under 500K so I can strip off the 2nd and 3rd.

don't you think the lenders would do their own appraisals in a bankruptcy case and don't you think those numbers are going to come in as high as possible to avoid the potential of lien stripping? as least that is my thinking if I was on the lender side.

in any case I am planning on filing chapter 13 and having the BK lawyer attempt to strip the 2nd & 3rd. if a loan is only secure up to the value of the property it's strange that you are not able to do a partial strip of the 2nd or 3rd mortgages? I realize it's an all or none type proposition...in cases where people are right on the border I would think the bank would submit their own appraisal as to avoid the lien strip.

anyone have experience around this?

With a full appraisal you'll probably come in just below $500k. I would let the appraiser know that the purpose of the appraisal is for a BK valuation. That might cause them to skew the value on the lower end of the spectrum. They may even ASK if you want them to do that. Right now property value in California is still dropping like a stone. Order an appraisal, it'll be the best $250-300 you'll spend in this process.

One problem you might run into is an attorney who won't do a lien strip unless the value is substantially lower than the amount owed on the 1st mortgage. I had one guy "showing me the magic" of a CH13 and then telling me they won't try to strip a lien unless it was at least $50k below the value of the first. I looked into "the magic" of the front door. Of course this guy also told me my payment would be about double what they other attorneys had told me to expect. Shop around for attorneys... a lot. See as many as you can.