Filed a Chapter 13 100% Secured Creditor Payback after a Ch 7 Discharge

[justbroke]

What exactly would the AP claim? I'm learning as I go here, so sorry if my questions seem simplistic.

It will claim that in the 11th Circuit Court of Appeals (Florida, Alabama, Georgia), you cannot receive a discharge in a serially filed Chapter 13 by operation of law (in 11 USC 1328). Consequently, because of the case of In Re Nobelman and maybe In Re Tanner, you cannot have the lien strip "stick" without an actual discharge. Most of the Divisions and Districts within Florida have clarified how the Order granting the lien strip should read. The fact that the attorney may have filed a non-compliant order and the judge signed in, may be a simple oversight.

Again, it would be up to the creditor to challenge, but you probably won't here much until you go to sell or refinance the property.

11 USC 1328 (f) Notwithstanding subsections (a) and (b), the court shall not grant a discharge of all debts provided for in the plan or disallowed under section 502, if the debtor has received a discharge...

[BrianBMS]

Bio,

No, I didn't realize that. I only know what I read in the motion giving the creditor time to respond after being filed last May. They did not show at the hearing or object at the hearing. The motion was granted. I'm not even close to being an expert but why would a creditor spend time and money to reopen a case where the debt was discharged from the previous Ch 7 case and there is no equity to be had. They will just get a worthless lien on a homesteaded property. What exactly would the AP claim? I'm learning as I go here, so sorry if my questions seem simplistic.

Thanks for the responses,
Brian

[biotechsolution]

You do realize that the creditor will more than likely file an AP to determine whether you elgible for the lien strip "discharge".
Your bk can be reopened for the AP. I agree with JB, I can't see how you could win the AP.

[BrianBMS]

JB,

I searched the Order/Motion word by word and it doesn't say the word "discharge" which I know is what you're saying should be there. It only specifies that I complete the CH 13 plan. My attorney did mention that recently the courts are not allowing this as often but since my case was already filed, confirmed and the motion granted, I am OK. In any case, thanks for the guidance and thoughts. I do find the whole thing fascinating but would be more so if it wasn't my butt on the line!

Best regards,
Brian

[justbroke]

You're right,there was one more step that was done. It is the "Order Granting Motion to Value and Determine Secured Status on Real Property Held By XXX Bank". The motion was granted and the Lender has an allowed secured claim of $0. It goes on to say that upon completion of the Ch 13 case that the lien shall be deemed void and shall be extinguished automatically without further order of the court. If the CH 13 case is dismissed the lien will be restored. I am not allowed to record the order until I receive a notice of completion of Plan Payments of the Ch 13 case. There is no way I can't finish the plan payments - they are very low. I'm looking good for this one I think.

I sit and and just can't fathom how the Judge signed that Order granting the lien strip, without any language indicating that there must be an entry of a discharge in order for the lien to be extinguished. This was so important, that in 2009, the majority of the Divisions/Districts in Florida issued sample orders and updated the Local Rules to reflect this.

If you're lucky, you can record the document and the lender won't complain. Technically, the lender should file a "Mortgage Release" with the County Clerk of the Court, upon completion of the plan and discharge of the debtor.

[BrianBMS]

JB,

Thanks for the reply. I can't say I totally understood the intricacies but it is appreciated.

You're right,there was one more step that was done. It is the "Order Granting Motion to Value and Determine Secured Status on Real Property Held By XXX Bank". The motion was granted and the Lender has an allowed secured claim of $0. It goes on to say that upon completion of the Ch 13 case that the lien shall be deemed void and shall be extinguished automatically without further order of the court. If the CH 13 case is dismissed the lien will be restored. I am not allowed to record the order until I receive a notice of completion of Plan Payments of the Ch 13 case. There is no way I can't finish the plan payments - they are very low. I'm looking good for this one I think.

Brian

[justbroke]

The part that seems to help me is in the "Procedure..." says that the creditor has to file a proof of claim - none was filed before the expiration date or bar date. Part 6 also it says that "The debtor’s Chapter 13 plan shall provide for the stripping off of the lien, conditioned on the debtor’s obtaining a discharge or on further order of the Court." It's the on the further order of the Court I'm depending upon since my plan clearly states my reason for the filing and the plan has been confirmed. It looks like the case just specifies that the 2nd lien holder can collect if there is a foreclosure case brought by the first lien holder. I didn't see anywhere where the amount owed to the 2nd lien holder had been discharged in an earlier CH 7.

There would STILL need to be an actual claim in the Chapter 13. The claim would simply be that of a secured creditor who has no legal right to an in personam recovery of the balance of the promissory note, but does have their in rem property rights still.

The entire reason for needing a an actual claim before filing a motion to determine secured status and strip lien, is precisely because if there's no claim, then you can't ask the "claim" to be valued! (More a chicken and the egg conversation, but it's much easier since the motion would be attacking the claim, and if there isn't a claim, how could you attack it (have it valued)?)

I just don't see this working anywhere in Florida from my experience. Please know that confirmation of the plan has nothing to do with the avoidance (stripping) of a lien. The lien must be stripped either as a contested matter (by motion) or as a complaint (by adversary proceeding).

[despritfreya]

What is the legal term for "shutting down the case"?

Not sure there is one. I just meant paying off the plan early to close it out.

Des.

[Pandora]

BrianBMS

on your confirmation order - does it clearly state that your lien will be removed once your plan is completed? I know for ours on the judges orders state it. Here is what our confirmation plan order says:

The second deed of trust lien of Defendant, XXXXXXXX is void and shall be of
no effect during the pendency of this case under chapter 13. The claim of XXXXX
regarding the second deed of trust lien shall be allowed in full as an unsecured
claim and shall be treated as such under the Debtors’ Chapter 13 Plan. The lien shall be
void for all other purposes when and if the Debtors complete their performance as
required by the confirmed chapter 13 plan.

C. The Debtors shall not file this judgment with the Clerk of the Court for the Circuit Court
of the XXXXXXX until the Debtors have completed their performance as required
under the Chapter 13 Plan and has received their order of discharge. Upon receipt of the
order of discharge in this case, the Debtors may file a copy of this judgment with the
Clerk of the Court for the Circuit Court of the County XXXXXXXX. The Debtors shall also,
at that time, file a copy of the order of discharge with the Clerk of the Court for the
Circuit Court of the County XXXX.

D. The Clerk shall send a copy of this Order to Debtors’ counsel so that he may record the
same in accordance with the Local Rules of this Court.


Yours should have something similar in nature I would think.

[BrianBMS]

Des,

Thanks for the reply. What is the legal term for "shutting down the case"? Or is there one? Also is finalizing the lien strip done with a motion (we already did the motion to value which I think you already figured out)?

Thanks,
Brian

[BrianBMS]

JB,

Thanks for your reply. I appreciate the research that you did.

I read the link you sent. The part that seems to help me is in the "Procedure..." says that the creditor has to file a proof of claim - none was filed before the expiration date or bar date. Part 6 also it says that "The debtor’s Chapter 13 plan shall provide for the stripping off of the lien, conditioned on the debtor’s obtaining a discharge or on further order of the Court." It's the on the further order of the Court I'm depending upon since my plan clearly states my reason for the filing and the plan has been confirmed. It looks like the case just specifies that the 2nd lien holder can collect if there is a foreclosure case brought by the first lien holder. I didn't see anywhere where the amount owed to the 2nd lien holder had been discharged in an earlier CH 7.

Don't get me wrong, I'm no attorney - just a bit confused as to how this will work!

Regards,
Brian

[justbroke]

You cannot get a lien strip in a Chapter 20 in Florida. The model plan in all Florida Districts requires the following any Order Granting the Motion to Determine Secured Status and Strip Lien:

(a) Upon the entry of a discharge herein, the lien encompassing Claim No. XXX of the Creditor shall be voided, terminated and set aside and shall not hereafter be construed to lien the above real property or any other real property interest obtained by debtor in the future.

(b) Alternatively, upon the dismissal of this case without reinstatement or conversion of this case to Chapter 7, said lien shall remain in full effect.

(See also Florida's Middle District's Model Proposed-Order.)

I wish you luck with the lien strip... but I haven't seen one in the 11th Circuit when there the debt was discharged in the Chapter 7 case. To the contrary, most Districts and Circuit Court of Appeals (including the 11th of which Florida is a part of) have reasoned that no discharge means no lien avoidance.

[despritfreya]

So since I won't have a discharge will I just get a notice of a completed/closed bankruptcy case? Is there any point in paying this down in less than the three years? I have been offered funds in the form of a gift to pay it more quickly.

Once your Plan is completed you should simply get a Notice of Completed Case and Final Accounting from the Trustee. As to paying off in less than 36 months, I see no reason such could not be done. Once you have finalized the lien strip discuss shutting down the case with your attny.

Des.

[BrianBMS]

Des,

Thanks for the reply. I have stayed away from any new debt at the advice of my attorney. The 1st is current and the primary reason was to strip off the lien, but yes, the payments are going to delinquent property taxes legal fees and trustee fees. So since I won't have a discharge will I just get a notice of a completed/closed bankruptcy case? Is there any point in paying this down in less than the three years? I have been offered funds in the form of a gift to pay it more quickly.

Your input has been extremely helpful. Thank you for that.
Brian

[despritfreya]

You will not receive a Chapter 13 discharge as you are not eligible for one nor do you need one.

Presumably you have not run up debt from the filing of the 7 to the filing of the 13 and are utilizing the 13 for the sole purpose of striping off the lien, paying the delinquent property taxes, any arrears owed to the 1st, legal fees and the trustee's fees. (Remember the debt for the 2nd was discharged in the 7 - only the lien survived.) By the end of the Plan you, presumably will have paid 100% of all claims hence, no need for a discharge even if you could get one.

Des.