can i file chapter 13 if im below the median and do a lien stripp?

[LadyInTheRed]

ill just pray that they extend the "mortgage forgivness act". till then ill just keep finding some how to save some money for taxes for next year.

Taxes will not be an issue if you are insolvent immediately before the debt is forgiven. You don't need the mortgage forgiveness act to be extended. There are no asset exemptions when determining insolvency, so you need to count all the cash you've saved when determining whether you are insolvent. See IRS Publication 4681 for information.

[messedup]

ladyinthered, yes i do have the cash to pay the settlement i have been putting away cash for years for a time like this or for when im in bk. i think ill be insolevent, all i have is my upsidedown house and a 5,000 dollar car. bk for us would seem like a long 5 years of no tax returns and payments. ill just pray that they extend the "mortgage forgivness act". till then ill just keep finding some how to save some money for taxes for next year.

[LadyInTheRed]

messedup, did you get far enough to see how much you would have paid back on the 2nd under a chapter 13? In a chapter 13, is the 1st discharged, and you basically "pay and stay" but you can walk away anytime you want? Seems like doing the figures in my head you would have come out better all around with the 13?

A mortgage that is not stripped or paid in full during a Chap 13, is not discharged. Given the balance of messedup's first, I doubt it would be paid off in a Chap 13, so it would not be discharged. However, messedup is in California. If the first is a purchase money loan, it is a no-recourse loan. Messed up can walk away at any time without personal liability for a deficiency. But the default and foreclosure could and probably would be reported on credit reports.

[brokehmowner]

messedup, did you get far enough to see how much you would have paid back on the 2nd under a chapter 13? In a chapter 13, is the 1st discharged, and you basically "pay and stay" but you can walk away anytime you want? Seems like doing the figures in my head you would have come out better all around with the 13?

[LadyInTheRed]

But if you are not sure you have access to that cash then shouldn't they just go with a bk?

It depends. As spidge points out, if current debt exceeds current assets, the foregiven amount is excludible from taxable income. If messedup has no significant assets other than the house, chances are that he/she is insolvent.

If messedup is not insolvent, then it comes down to whether it is less expensive to file Chap 13 and do a lien strip or to get on a payment plan with the IRS. I supspect a Chap 13 would be by far less expensive and completed earlier than a payment plan to pay tax on $120,000.

messedup, do you have $20,000 to pay the settlement?

[dmc-2008]

But if you are not sure you have access to that cash then shouldn't they just go with a bk?

[spidge]

Omg where are you going to come up with the tax on 140k in six months to a year? That's a lot of cash! Good luck and keep us posted! You cannot discharge tax debt and the interest on it can be insane from what I hear.

He/She could file insolvent if qualified.

[dmc-2008]

just a update, we were gonna file chapter 13 on aug 1st, but just received letter from my second mortgage that they want to settle for $20,000 that's

15% on the dollar from 140,000 or so. they agreed to release lien and report on my credit report "settled for less", so i took there offer,i know there be tax

remifications next tax season but i guess ill deal with that when i comes, i just hope congress extends the "mortgage forgiveness debt relief act" another

year or two. thanks to all on this forum help me alot!

Omg where are you going to come up with the tax on 140k in six months to a year? That's a lot of cash! Good luck and keep us posted! You cannot discharge tax debt and the interest on it can be insane from what I hear.

[messedup]

just a update, we were gonna file chapter 13 on aug 1st, but just received letter from my second mortgage that they want to settle for $20,000 that's

15% on the dollar from 140,000 or so. they agreed to release lien and report on my credit report "settled for less", so i took there offer,i know there be tax

remifications next tax season but i guess ill deal with that when i comes, i just hope congress extends the "mortgage forgiveness debt relief act" another

year or two. thanks to all on this forum help me alot!

[dmc-2008]

I was considering a 13 in order to get a lien strip. My attorney told me that even if you can only pay the trustee, you can still get a 13 for 3 three years. And if you have trouble you can revert to a chapter 7 if you have to.

In the end after both my DH and I got raises, we ended up being $1,100 over the median, which meant we could NOT get a 3-year plan. But we did end up qualifying for a 7 so we decided to do the 7 because we did NOT want to be under a 13 for 5 years with no room for emergencies, set backs, etc. We figured the 2nd would not bother us as long as we were under water, and once they started foreclosure noise we would start talking settlement, to hold them off, and then look for a rental in the meantime.

As it turned out the 2nd ended up extinguishing the loan completely in Nov 2013 under their HARP program so we were extra glad we didn't go chapter 13. They got $3k out of the deal from the government, which is about $3k more than they would have ever gotten from us.

You are very lucky'

[LadyInTheRed]

Whether there is an additional cost depends on your agreement with your attorney.

There is no reason to give any kind of warning to an appraiser.

Don't get too far ahead of things. Get an appraisal. If the value is below the balance of the first mortgage, file a Chap 13 and petition for a lien strip if you think that is your best course of action. Worry about an objection by the bank if and when the bank objects. I've heard of many successful lien strips, but very few objections by creditors.

[messedup]

so lets just say we have a hearing, will there be additional cost for this? and should i let the appraisal person know that he/she might have to go to court on this appraisal if the object to it.

[LadyInTheRed]

ladyinthered,ok lets say they challenge the valuation,what are they gonna do get there own home appraiser to value the home? and if it still comes less than balance owed on 1st then the lien strip will still be granted? am i correct or is there more to it? thanks

If they get their own appraisal and it comes below the balance of the 1st, they won't bother objecting to the lien strip because they will have no basis for an objection. It all comes down to the value of the home vs. the balance of the 1st mortgage. If they do object because they don't agree with your appraisal, then you and the bank would both have your appraisers testify at a hearing and the judge would decide based on their testimony what the value is. If the court determines the value is above the balance on the 1st you lose. If the court determines the value is below the balance of the 1st, even by one dollar, you win.

[messedup]

ladyinthered,ok lets say they challenge the valuation,what are they gonna do get there own home appraiser to value the home? and if it still comes less than balance owed on 1st then the lien strip will still be granted? am i correct or is there more to it? thanks

[LadyInTheRed]

valleyyum, 1st loan bofa-460,000
current market value around 440,000
2nd loan have not payed in 6 years ocwen-140,000
a collect agency called-nationwide credit inc. is handling the 2nd now

do u think the court will approve the lien strip or is that to close for it? im in Ca.

The real question isn't whether the court will approve. The question is whether the creditor will challenge the valuation. If the balance of the mortgage were only 440,001, the court would approve the strip as long as the creditor didn't challenge the valuation. The value is as of the date you file the BK petition. If values are increasing quickly, you should probably move pretty quickly to get your BK filed.