Crazy Idea... just tell me if you think this is possible?

[RBisDebtFree]

My total unsecured debt is about $30k and secured is $815k. The first mortgage on my house is $625k -- the remaining $190k is a co-signed HELOC with my parents on another property. Trustee knocked off the lien / loan for $625k from my house and he (trustee) is selling the house free and clear.

By knocked out, I mean that he actually hired an attorney and found some big problems in the loan documents, the judge denied the motion for relief from stay and it looks like the mortgage was actually illegal or fraudulent from the bank's side.

The house is worth approximately $500k, and my debt (now without the $625k mortgage) is $220k. Let's say the house is sold for $500k, $50k goes to all expenses from the trustee, $125k to trustee (crazy, but do they really get 25% of all assets they recover) and $220 to other creditors. So this totals $395k altogether, $500k - $395k = $105k? Where does that go?

It feels silly to even to thinking about asking but I still will: if I file a claim, I am going to get the rest? Just curious if anything like this is even possible...

[justbroke]

I'm not sure, but usually, any proceeds left over after the Trustee pays his/her legal fees, acquisition/sale fees, and then pays off your unsecured creditors that filed "allowed" claims... would be the Debtors. I would think that the Trustee won't get anywhere near the actual Market Value, so, it will probably be less than FMV anyhow. (I'm assuming that the $222K you come up with includes the $190K HELOC.)

Also, the Trustee does not get 25% of everything. They get 25% of the first $5,000 plus 10% of any amount over $5,000, but less than $50,000, plus 5% of any amount over $50,000 and under $1,000,000, and 3% of any amount above $1,000,000.

So, on $500K, the Trustee would earn about $28K commission on that. (They only earn $5,750 on the first $50K and then 5% of the rest which is about $22.5K.)

[RBisDebtFree]

Thank you for the information, very detailed! So basically no claim is needed? Whatever is leftover is debtor's? I would be amazed if this all goes through but my attorney said that he has seen this particular trustee to void liens and debts on a few properties...

[justbroke]

Actually, I thought some more. The $625K debt becomes unsecured and they would just file an "unsecured" claim. That would eat up what's left. However, if they don't file a claim or you object to the claim... it could get interesting.

Basically, the first lien holder, that had the lien avoided, would become an unsecured creditor should they file an unsecured claim by the claims bar date. All of the creditors should be rushing to file claims at this point. This is one Chapter 7 case, that may deliver a substantial dividend to the unsecured creditors.

[RBisDebtFree]

Yeah, I was thinking that the bank would file an unsecured claim, however, if trustee's attorney (on behalf of the trustee) proves that the debt was extended to me illegally or fraudulently, then, I believe they can't count that as a debt at all. I am trying to stay away from all of this, but what my attorney understood from talking to the trustee after one of the 341 days for that trustee is that they forged some of our signatures on some of the documents in addition to recording a lien on the wrong lot (I bought a land that was part of a subdivision, mine is lot 2 and they filed against lot 1). So I guess the $625k is out of the picture then I will be richer after becoming bankruptcy than I was before and if the $625k is not out of the picture, then at least I will pay off all my other creditors

[justbroke]

Like I wrote, they may not file a claim. Also, if they did file a claim, either you (through your attorney) or the Trustee could file an Objection to that Claim on the basis that you just mentioned.

[RBisDebtFree]

Yeah, if they don't file a claim or they file and I fight and win, it could get very interesting -- rich bankrupt

I'll definitely keep everyone posted on what happens with this!

[iv65536]

When discussing a similar scenario with my attorney, I had a contingency plan worked out in case "something silly happens" (i. e. this scenario). Given that the relevant time periods in my case had me living in Minnesota the whole time, I have explored the scenario of amending exemptions from federal to state (I can protect any home equity as a result under state law, but I lose my wildcard). Doing so would leave me potentially with a home encumbered only by the 2nd, assuming the 2nd survives the trustee's scrutiny.

[iv65536]

My total unsecured debt is about $30k and secured is $815k. The first mortgage on my house is $625k -- the remaining $190k is a co-signed HELOC with my parents on another property. Trustee knocked off the lien / loan for $625k from my house and he (trustee) is selling the house free and clear.

By knocked out, I mean that he actually hired an attorney and found some big problems in the loan documents, the judge denied the motion for relief from stay and it looks like the mortgage was actually illegal or fraudulent from the bank's side.

The house is worth approximately $500k, and my debt (now without the $625k mortgage) is $220k. Let's say the house is sold for $500k, $50k goes to all expenses from the trustee, $125k to trustee (crazy, but do they really get 25% of all assets they recover) and $220 to other creditors. So this totals $395k altogether, $500k - $395k = $105k? Where does that go?

It feels silly to even to thinking about asking but I still will: if I file a claim, I am going to get the rest? Just curious if anything like this is even possible...

Another question: on the co-signed property, is it your name on the deed, or is it your parents' names?

[RBisDebtFree]

When discussing a similar scenario with my attorney, I had a contingency plan worked out in case "something silly happens" (i. e. this scenario). Given that the relevant time periods in my case had me living in Minnesota the whole time, I have explored the scenario of amending exemptions from federal to state (I can protect any home equity as a result under state law, but I lose my wildcard). Doing so would leave me potentially with a home encumbered only by the 2nd, assuming the 2nd survives the trustee's scrutiny.

That's interesting, we have $125k homestead exemption in washington state. That's a good idea, I don't know what it would all do to my case, but still, nice to know, maybe that an option.

I guess all assets that Washington state exemptions don't cover, I can buy back from the $125k ... if I get them!

[RBisDebtFree]

Another question: on the co-signed property, is it your name on the deed, or is it your parents' names?

My name is not on the deed, what does it affect though?

[iv65536]

My name is not on the deed, what does it affect though?

If your parents' property also secures this HELOC, then they will have a merry Christmas indeed. Either way, you're going to have a very pleasant holiday season.

As for me, I think 2010 could turn out to be a February that I will never forget. I could be enjoying a Vikings Super Bowl win, with the last day for objections being the day after the game.

[RBisDebtFree]

Do you mean that we might get some of the equity back?

[iv65536]

Do you mean that we might get some of the equity back?

Probably because you will likely be getting cash out in the deal and that the HELOC likely will soon also be history.

That being said, I plan to get the mortgage papers out of the safe deposit box for my attorney to copy and review. From what I am reading, Wall Street's securitization machine did a terrible job keeping the public records straight, and I just wonder how many of the numerous motions for relief from stay by MERS that I see on the judges' calendars actually should be denied.

[RBisDebtFree]

Yeah, nobody knows. Well, I know that I will be richer after bk ($0 debt after vs. $815k debt before) but I didn't know that I could actually be richer cash-wise. Of course, there's a thousand and one thing that can go wrong but why not to hope and believe? That's what I am going to do!