Lien Avoidance

[Bob Walker]

I have a motion to avoid a portion of my 2nd mortgage and the problem I am having is that the bank is objecting that the lien is consenual and is not exempted under 11 USC 522 (f)(2). Does anyone have any research or case law to support the exemption and lien avoidance of a consenual lien?

Thanks

[HHM]

LOL, you are trying to do a lien strip on a 2nd Mortgage in a Chapter 7.

I assume you are not represented by an attorney?

Your first mistake is that you cannot avoid a "portion" of it. Lien strips are all or nothing. You have to demonstrate that there is NO value securing the lien. And even then, only some jurisdictions allow this to happen. And yes, the bank is correct, if the lien in consensual, you cannot modify the rights of the lien holder. You are attempting a cram-down which you cannot do on consenual residential liens.

[Bankruptcy Atty]

Yes

I have a motion to avoid a portion of my 2nd mortgage and the problem I am having is that the bank is objecting that the lien is consenual and is not exempted under 11 USC 522 (f)(2). Does anyone have any research or case law to support the exemption and lien avoidance of a consenual lien?

Thanks

IF IT IS CONSENUAL AND THEY CAN PROVE IT, YOU ARE SCREWED.

[Bankruptcy Atty]

522(f) AND CRAMDOWN IS DIFFERENT

LOL, you are trying to do a lien strip on a 2nd Mortgage in a Chapter 7.

I assume you are not represented by an attorney?

Your first mistake is that you cannot avoid a "portion" of it. Lien strips are all or nothing. You have to demonstrate that there is NO value securing the lien. And even then, only some jurisdictions allow this to happen. And yes, the bank is correct, if the lien in consensual, you cannot modify the rights of the lien holder. You are attempting a cram-down which you cannot do on consenual residential liens.

LIEN - 522
MORTGAGE - CRAMDOWN

[HHM]

LIEN - 522
MORTGAGE - CRAMDOWN

I kinda think that is what I said in a round-about way...

[Bob Walker]

What if

What if the usage of the HELOC were used for a business and not personal usage? I have all my money orders and receipts showing where every penny of that money was spent and none of it was spent foolishly.

Please be a little kind here, you are an attorney with years of experience and yes I am not being represented by one because I cannot afford one.

Bob

[chpxiii]

Bob Walker, with all due respect, they are being kind. They're telling you the truth. That's a great amount of kidness right there.

[hrh25]

Bob,

I had a couple of attorneys recommend this to me also, it is possible in some places. The key is that you can not have even one penny of equity on the second mortgage for it to work, there can not be anything for the second mortgage to be attached to. Also, its my understanding that this can only be done in chapter 11 or 13 were you pay back your disposable income for fives years.

Regards

HRH

[HHM]

Sorry Bob...

I didn't want to come out and say you are going to lose this motion 5 ways to Sunday because I obviously don't know your situation. But as hrh25 points out, lien strips, are typically only done in Chapter 11 and 13, and there can be NO equity for the 2nd mortgage.
Chapter 13 has a specific provision, 1322(b)(2), for lien modification (but the extent you can modify and/or strip a lien under that provision varies by Court Circuit).

Section 522 only applies to Judgment Liens (on any debtor property), and Non-purchase money security interests (in household goods, tools of trade, or health aids).

[Bob Walker]

Thanks

Thank you to all.

In fact, I spent a couple of hours this morning researching some other case law and have found a case that went all the way to the United States Supreme Court specifically centered around this topic, which would certainly be of interest for all those in this similar situation. Bottom line, it was ruled that one cannot strip a lien like this in a Ch. 7 filing.

In fact, the vagueness of two seperate statutes caused a riff within the Court opinion itself it seems and still was not corrected during the last changes to the Code.

One section reads one way, while another reads another and it seems the "allowed secured claim" issue and definition of that is what needs to be addressed by Congress.

So regardless of the lien status as their response shows, even if I prove regardless of consensual or judicial lien, the case is still pretty much already been argued to the highest court and decided that the lien, though secured long ago, remains secured throughout the life of the lien, unless foreclosure occurs.

Well now doesn't that just suck! So my advice to ya'll out there tapping your equity as a credit card.... DON'T! If you ever have to file Ch 7, you won't be able to wipe that part of the slate clean.

Have a good day ya'll

The case opinion can be found here:

http://vlex.com/vid/19963441

Dewsnup v. Timm, 502 U.S. 410 (1992)