Am I Screwed?!?

[BuriedAlive]

[MSbklawyer]

I can't speak for Arizona, but in Mississippi there's no way a family of 4 or 5 or even 10 would be allowed to keep a $625,000 house with a $793,000 combined mortgage unless you were paying the unsecured creditors 100%. The payment on that would be north of $4500 per month. I expect the judge would hold that you could find more reasonable digs and pay your unsecured creditors something instead of trying to service that kind of debt. In effect, you don't own your home. There's no equity. In effect, you're just paying $4500+ a month rent.

I hate to be the one to tell you that and I'll defer, of course, to what your AZ lawyer advises, but I can't see you keeping it in a bankruptcy with those kinds of numbers.

[BuriedAlive]

[momofthree]

I was under the impression that "cramming down" a 2nd mortgage was only possible on an investment property, but I could be wrong....

IF that is the case though, and your home is worth the $625k that you think it is, then you'd have a $237k 2nd that you'd have to pay in full during your plan. That's about $4000 a month just to pay the 2nd mortgage. I'm guessing that if you have that kind of dmi, the trustee wouldn't look favorably on that kind of money going to paying on your house when it could go to unsecured creditors.

Keep us posted on your progress...

[BuriedAlive]

Believe me, if I had that kind of DMI, I would not be in this boat. I would be needing to get a loan/gift from a family memeber in order to pull it off, and even then, that would probably be more than I could swing. It really depends on how the BPO comes in. We're seeing sales of my same house elsewhere in my neighborhood for as low as $366k - they are short sales and REO sales, but they are comps non the less. My estimate of $625k may be way off based on what I am seeing now. Either way, I want to get educated on my options (or lack thereof).

You can't ever know too much!

[hughewil]

so you are saying if your home is worth more than your 1st mortgagae, you only have to pay the overage during your plan and the rest becomes unsecured?

like
1st motragage - 200,000
2nd - 100,000
300,000 total

house value - 225,000

you pay the additional 25,000 on the second and the other 75,000 becomes unsecured?

I thought if even a penny of the second was secured then the entire loan was secured.

[BuriedAlive]

Yes, this is my understanding after talking with two different lawyers, and your example is correct. There is a section in the BK code (can't find it at the moment) about determining what constitutes "secured" debt. According to both lawyers, it is very clear that if the value of the property is reduced below the lien amount, the portion above the lien amount can be treated as unsecured debt.

Again, I am still doing my research on all of this and I expect to find out a lot more this week. I asked one of the lawyers to send me case law where this has happened in the recent past.

[catleg]

You can't cram down the 2nd on your residence but if the lender will consensually agree to a lower amount (i.e. a principal reduction) you might be able to reduce it that way.
In a 13 you're supposed to pay what's contractually due on secured loans within the 60 month commitment period.
If that isn't possible then I'm not sure you can get a plan confirmed.
Also, this might result in little or no recovery for unsecured creditors and your local ch13 trustee would (I suspect) object to the plan on totality of circumstances.
One way out might be to do this as a chapter 11 which only requires you to pay all of your disposable income to the plan, which can favor secured over unsecured creditors.
This is going to be pretty complicated so good luck.