CH7 question regarding 2nd Mortgage

[Dollar Bill]

Thanks for the info. I am gonna run this by my atty, and ofcourse get another appraisal done to see if it all makes sense.

Just wondering. I don't mean to thread jack either, but I am on disability, and my wife just lost her job on 9/8. She will get hired soon, and my disability runs out 12/1. I will then file unemployment until I start to work for a company.

Is there a better time to file the C13 for the purposes of lien stripping? My house is mainly the only thing I really want to keep. I have priority debt such as 7k to IRS. 6K to the state for payroll taxes etc. A car that I don't really car about giving back.

Any thoughts?

[jessegirl]

HHM - I have to do a 7, to discharge 185K of cc debt that I cannot afford to pay anymore. Why would i do a 13 when I qualify for a 7? Are you telling me that I cannot do a 7 and then go into a 13 after that? See my attorney said that I would stop paying the first mortgage as soon as i discharge my 7 and then i would immed. go into a 13 to repay the first mortgage and while doing so in a 13 we would strip the lein. Can it be done that way? He insists that it can be done. I really appreciate your input. I know nothing about any of this, And when I hire an attorney I expect him/her to know what he/she is doing, and when i find out that it cannot be done, I will go back to him and give him a rash of s***. I just want to have all my facts and be able to present them and do not want him to make me look like an ass in the end. They are very fats talkers and make me feel like I do not know what I am talking about. So any more input on this i would truly and whole heartingly appreciate. Thanks!!!

[biotechsolution]

jessegirl other posters have given you the answer.

You can file a Chapter 13 after your 7 but you cannot get a chapter 13 discharge until 4 years after your chapter 7 discharge. Under the new bankruptcy laws in 2005 what your lawyer is talking about can no longer be done.

You can file a chapter 13 after your chapter 7 but you would have to payback everything at 100% it is only for people catching up on arrears that may have happened during the chapter 7.

But one more time.

You cannot get a discharge in a Chapter 13 until you wait for 4 years from your Chapter 7 discharge.

[HHM]

I have to do a 7, to discharge 185K of cc debt that I cannot afford to pay anymore.

I think that statement is where the crucial misunderstanding may lay.

But first, let's get some clarifications.

1. In this proposed chapter 13, will you be paying off your first mortgage within the 60 month time frame? How long does your attorney say the chapter 13 will last?
2. You say you qualify for a chapter 7, are you above or below the median?

If you have no true priority debt and no disposible income (hence, the ability to file a chapter 7) then a cheaper and more streamlined approach would be this.

File chapter 13, pay your 1st mortgage inside the plan for the term of the plan and pay unsecured creditors ZERO percent. The length of the plan is determined by if you are above or below the median. If you are above, 60 months, if you are below, 36 months. The net result would be this: (1) you would strip the second, (2) the trustee would be making your mortgage payment for the length of the chapter 13, and (3) your $185K in unsecured debt would be discharged at the end of the 13 without you having to pay anything back to them.

Thus, unless there are additional facts you have not shared (and no, I am not going to go read your other posts), I really don't see why you need to do the chapter 7 first if your goal is merely to strip the 2nd.

[jessegirl]

Who determines paying zero back to unsecured creditors in a chapter 13? I always thought that was the trustee. Before we signed with this lawyer we spoke to other lawyers who said expect to pay 10% back in a chapter 13.
Let me just reiterate our plan:

Info:
House worth $325,000
1st mortgage $385,000
2nd mortgage $95,000
CC Debt $185,000

1.) Chapter 7 discharge unsecured debt and personal obligation to 2nd mortgage.
2.) After discharge of 7 stop paying the 1st mortgage.
3 Chapter 13 strip the 2nd mortgage lein and repay the 1st mortgage payments that were missed. These payments will be in the bank so the chapter 13 should be paid off instantly.

Thoughts?

I know some of you are getting annoyed but i need to get all info. so that i can go back to the attorney with the correct information that i am getting from this forum, so if by any chance if this is annoying you, please do not bother to answer. This forum is for that reason, to get all info. we need.

And to all others, thank you so much....

[dcopel02]

Any changes Oct 1 or possibly with bailout

So how did the new changes on October 1st or any possible changes in the bailout bill......affect Jessesgirl's situation?

[HHM]

Ok, I see what this attorney is doing. Still, I am not sure I agree with it, he is churnning extra fees.

So basically, you allow your 1st mortgage to go into default after the chap 7 discharge to create a liability, and since you have no other debt, the chapter 13 would be rather short since the only debt to be paid is the arrears on the 1st mortgage and you strip the mortgage. One question that needs to be researched which I don't have an immediate answer for is whether you can strip a lien in a 13 that cannot be discharged.

[biotechsolution]

Jessegirl:

What your attorney is planning on doing is what 'was' called a Chapter 20. It was very popular for dealing with unsecured assets then secured or priority debt. You would discharge all your unsecured debt in the chapter 7 then refile a chapte 13 to deal with the secured and priority debt that couldn't be discharged in the 7. Technically it still can be done because you can pay any arrears on your secured debt and pay any priority debt in the 5 year plan time.

The problem that your attorney is going to have is after the bankruptcy reform act in 2005 is you cannot receive a discharge in a Chapter 13 if you have received a discharge in a Chapter 7 within 4 years.

When your attorney strips the 2nd mortgage from your first and makes it unsecured in your Chapter 13 and proposes that you don't pay it off in your Chapter 13 plan he is asking for a discharge of that debt. Since you are not paying it back you are essentially discharging the debt.

With the new bankruptcy law changes in 2005 that is not allowed by the court.

Any Chapter 13 that you file immediately after a Chapter 7 would require a payback of 100% because you aren't eligible for a discharge of any debt for 4 years. If you propose in your plan to pay the 2nd mortgage in full then it won't be a problem but that wouldn't make sense.

HHM is right in that you should just file a Chapter 13 if you want to keep your house and get rid of the second mortgage. Because what your attorney is doing wont' fly with the bankruptcy courts.

[HHM]

Like I said, without more research I am not 100% certain on the status of the 2nd mortgage in the chapter 13. The counter argument, the one your attorney is probably relying on, is that since the 2nd mortgage was not reaffirmed in the chapter 7, the chapter 7 effectively discharges the personal liability and any deficiency, thus, the follow-on chapter 13 only deals with the lien rights of the 2nd mortgage (strips it) and there is no lingering unsecured claim to be paid in the chapter 13.

Well, I hope it works out for you (I think it will).

[BKParalegal]

Ok, I see what this attorney is doing. Still, I am not sure I agree with it, he is churnning extra fees.

So basically, you allow your 1st mortgage to go into default to create a liability, and since you have no other debt, the chapter 13 would be rather short since the only debt to be paid is the arrears on the 1st mortgage and you strip the mortgage. One question that needs to be researched which I don't have an immediate answer for is whether you can strip a lien in a 13 that cannot be discharged.

You cannot

[debtmonster]

HHM,

My attorney states we will "discharge / remove" the 2nd mortgage in a Chapter 7. When he says remove, I think he is talking about my personal obligation to this 2nd mortgage. We have a 80 / 20 mortgage $380,000 / $95,000 and the value of our home is $325,000. Once the Chapter 7 is discharged we are going into a chapter 13 to strip the lein from the 2nd mortgage. Do you agree with this approach?

Thanks.....

What are people doing to afford $300-400k homes if their annual salary is not 1/3rd of the sales price? How can you afford such an expensive home?

I would never even think of buying a $300-400k home unless we had a household income of no less than $150k/yr.

How is America doing this? All of the homes where I used to live are in this price range and the median income is $51,000/yr. household income for my state. The median cost of a home should be $150,000.

[jessegirl]

Debtmonster - Aren't you the one that your wife drives a Beamer SUV??? And she refuses to get rid out it, eventhough you are having problems paying it??Maybe where you live the median house is 150K, but where I live thats a handyman special. Just cannot find a house for 150K. Unless, it needs 150K of work.

Anyway, HHM thanks so much, i knew if i explained it better you would understand what I was talking about.

Bk Paralegal, I am sorry but you are not right on this one. We are not looking for a discharge in the 13, we are just looking to strip the second mortgage lien on the house. Maybe you didn't read all the information that was going back and forth.

AGAIN, WE ARE NOT LOOKING FOR A DISCHARGE IN THE 13...JUST TO STRIP THE LIEN

HHM, understands now what we are trying to do and yes it can be done.

Thanks so much to all for your information. I truly appreciate it.

[debtmonster]

What I meant is houses "should be" $150k since the median income is $51k here.

When I bought the BMW we were making $7,000 to $9,000 per month on a regular basis with 3 incomes.

What I am wondering is how people are still able to buy such expensive $300-400k homes without having a $150k or higher household income.

Why are banks not turning people down?

[NowImDownInIt]

I might be wrong in saying this, but that just seems to me like abusing the system...

[jessegirl]

Really why??? Why is that abusing the system?? I cannot afford the payments. Did you file a BK? Why? Maybe you abused the system being you think like that? You do not know my situation at all, so by making a comment like that, is just totally out of line. Look, i am on here asking questions for help and then someone like you makes a wise a** comment like that, you shouldn't be on a forum with people who are looking for help.