Second loan stripping without spouse filing for Ch.13

[smkrishna]

I asked this question in another thread but didn't get proper response and so, posting it again as a separate thread. I have appointment with my attorney only next week.

The real issue is:

I am desperate to know about Stripping the second loan with just one filer (not having your wife as a filer for Ch.13). In fact, that's the reason for my bankruptcy. I am from S.Florida. I am planning to go for Ch.13 with the intent of stripping the 2nd loan on your primary (in my case its $126,000 with BofA) and C.Card Debts ($52,000) without my wife as a filer for Ch.13. I haven't yet filed Ch.13. I just stopped 2 credit cards (April) and HELOC this month. Planning to file Ch.13 in July or August.

In my case, I am the only person in Mortgage and Note of Primary Loan and HELOC on my primary home. My wife only has credit cards in her name and of course, in warranty deed as a spouse. There are no mortgage or HELOC loans in her credit report. Will this be advantage for me? Or it doesn't matter whether my spouse name is not on mortgage and deed. As you all know, Florida is not a community property state.

Expecting any expert's reply..

[Brazzy]

If she is not on the loans then the creditor will not pursue her. If she is a cosigner on the second then the creditor will let you strip the lien, but will probably move to lift codebtor stay and jack her up.

If she is not on the loan you can strip the lien and treat them as unsecured. They cannot pursue her if she is not a signer.

[NoTomatoCan]

I agree with Brazzy. If she is not part of the lien to be stripped, then she does not have to file for you to effectively strip the lien.

She has no liability on the loan.

[boochase]

Did some reading about second mortgages and foreclosures. I read the following: "If you go delinquent on your second mortgage, the lender can foreclose on your house and property. The foreclosure process varies from state to state, but generally takes from 2 to 18 months. It all depends on the terms of your loan. However, normally if mortgage payments are not received within 150 days, the bank can proceed with the foreclosure process. The second mortgage would be repaid after the first mortgage is paid in full. In fact, if the sale price is less than the value of the mortgages held against it, then in some states you could still owe an unsecured balance called a deficiency balance. The good news is that this new deficiency balance (if it exists and if your lenders pursue it) is an unsecured debt that you could conceivably enroll into a debt settlement program-ch13"

So, suppose we default on the second and allow the lender to commence foreclosure proceeding. I am the only potential ch13 filer; my wife is not. Both my name and my wife's name are on the second mortgage. I am in Florida. Both first and second are underwater. In this proceeding, the second becomes an unsecured balance. Now suppose we lose the house to foreclosure. It seems that at this point, we will have had the loan extinguished and no further obligations--is this correct?. Now suppose I file ch13 before the end of foreclosure proceedings. What would be the difference between having the second mortgage stripped in ch13 vs having it extinguished in foreclosure? I appreciate comments.

I did read over our promissory note. I would close all bank accounts at the bank to avoid seizure. Does/will the bank attempt wage garnishments? I am not working so no paycheck there. My wife receives a paycheck. Will the bank attempt to garnish her wages?

[Brazzy]

Making sure I have this right:
Both you and your wife are on both loans. The second lien is entirely unsecured. You are filing chapter 13, but your wife is not.

IF the second is in fact entirely unsecured and you default on the 2nd they typically will not foreclose unless you default on the first as well. Typically they will decline foreclosing from the second lien position and charge off the balance, but the lien remains and the collection efforts continue. If you file for chapter 13 and your wife does not you can move to have that second lien stripped from the property and treat them as unsecured. There is a codebtor stay that will not allow the creditor to collect on your wife. However they can move for lift of stay so they can proceed with collection efforts or legal action against your wife because she did not file.

[momofthree]

So, suppose we default on the second and allow the lender to commence foreclosure proceeding. I am the only potential ch13 filer; my wife is not. Both my name and my wife's name are on the second mortgage.

I'm not sure why your wife cannot file, but if her name is on the 2nd, they will still come after her for the deficiency balance if she doesn't file bk with you.

Both first and second are underwater. In this proceeding, the second becomes an unsecured balance. Now suppose we lose the house to foreclosure. It seems that at this point, we will have had the loan extinguished and no further obligations--is this correct?.

You will have no further obligations once you file bk, your wife will still be held accountable for the deficiency balance if she doesn't file.

Now suppose I file ch13 before the end of foreclosure proceedings. What would be the difference between having the second mortgage stripped in ch13 vs having it extinguished in foreclosure? I appreciate comments.

When someone strips the 2nd, they plan to keep the house and continue to pay the 1st mortgage. When the home goes into foreclosure, the people are giving up the house and will not continue to pay on the 1st.

[boochase]

I want to be the only filing for a couple of reasons. First, her high credit score remains intact; so getting credit (like to lease a car) would be easier. Second, none our CC's are joint acccounts. My credit cards have high balances and are unmanageable. My wife's CC's are paid in full every month. If my wife is included in the ch13, would she still be able to use her credit cards? Obviously her credit score will get trashed. In any case, should I stop paying my second mortgage? I have already stopped paying my CC's.

[NoTomatoCan]

If my wife is included in the ch13, would she still be able to use her credit cards?

If your wife files BK with you then no, she will not be able to continue to use her credit cards. Those debts will be included in the BK and you will not be able to use them.

In any case, should I stop paying my second mortgage?

If you stop paying your second mortgage and, as you mentioned, your wife is also on that mortgage, than her credit will be impacted. If she files BK with you, then you might want to consider not paying your 2nd if you are sure you will be filing BK and you are sure you can strip it.

As mentioned on this thread and another one, it is very unlikely that you will be able to strip the 2nd without your wife filing. And on the remote chance you can strip the lien, she would still be liable for the debt without discharging it in BK.

[smkrishna]

If you stop paying your second mortgage and, as you mentioned, your wife is also on that mortgage, than her credit will be impacted. If she files BK with you, then you might want to consider not paying your 2nd if you are sure you will be filing BK and you are sure you can strip it.

As mentioned on this thread and another one, it is very unlikely that you will be able to strip the 2nd without your wife filing. And on the remote chance you can strip the lien, she would still be liable for the debt without discharging it in BK.

NoTomatoCan, I am not sure about this. But, after doing lot of research, I can see that only "If Spouse is on the Note on HELOC, then she is responsible for 2nd loan or HELOC". So, the wordings should be "If your wife is also on that loan or Note, then her credit will be impacted".

In my case, my wife is not on Note but just on Mortgage as a Non-borrower Grantor. The words in Mortgage are as follows:
"Any Grantor or Trustor who signs this Deed of Trust, Mortgage but does not execute the Note or Credit Agreement ("Non-borrower Grantor or Trustor")
a) is signing only to grant, bargain, sell and convey such Non-borrower Grantor's or Trustor's interest in the property under the terms of this security instrument;
b)is not by signing becoming personally obligated to pay the Note or Credit Agreement;

In my case, my HELOC or second loan doesn't appear in my spouse credit report also. So, can any one tell me whether I can try to do second lien stripping without my wife filing for Ch.13, please??

[NoTomatoCan]

Smkrishna - My apologies. I just reread my response and you are correct. In your situation you should be able to strip the 2nd, but please check with your attorney.

I was trying to convey to boochase that it is the underlying debt obligation that you need to worry about (as you pointed out) not necessarily the registered mortgage.

If your wife is not on any loan and has no debt obligation then you should be able to strip the 2nd.

But please, speak with an attorned about your specific situation.

Your situation (with your wife not being on the loan) is different than boochase. If you are able to strip the 2nd than the bank has no recourse against your wife since she is not on the loan.