SETTLEMENT on 2nd

[Apocalypse]

I agree that you should wait until after BK to settle. The trustee will almost assuredly see the settlement as a priority debt payment and an abuse of bk. What does your attorney say? I can't think why it would be bad to wait until AFTER bk to settle. You will almost certainly do BETTER unless you have equity in your home, which would be highly unusual. Best of luck to you, it's a stressful time, and it's just WRONG that we have no clear answers in this country... you can't even have 10 accountants do you income taxes and come up with the same answer. That is WRONG.

[nichole04]

Thanks so much!

[mmertens67]

mmertens67, would you mind sharing which bank you 3rd lien was with? Thanks so much! Nichole04

Nichole, not at all. Bank of America.

[nichole04]

mmertens67, would you mind sharing which bank you 3rd lien was with? Thanks so much! Nichole04

[mmertens67]

Listen to the advice you are getting here. You are insisting on making a very poor decision here that will cost you substantially, maybe even jeopardizing your filing.

The transaction that would be undone is you paying back your relative. The trustee will tell you that you can either pay the trustee the amount you paid your relative or they will sue your relative to undo the transaction. Now you are paying that settlement amount twice. You are allowed to pay a secured creditor anything you want, you cannot pay an unsecured creditor a preferential payment. Your mortgage is secured, your relative is not.

If you get your vacation pay advanced to you, you may very well end up showing too much income pushing you into a CH13. If you pay off your second mortgage prior to filing BK, if your house ends up having equity in it that you cannot exempt, you may LOSE your house, or end up paying the equity that the trustee claims on your home.

Right now having this second mortgage hanging over your head actually helps your filing. Once that debt is discharged, then all you are doing is negotiating to purchase a worthless unenforceable lien.

If it is inevitable that you will be filing BK, consult with several lawyers and start the process before you make any more decisions regarding your finances.

I agree with this post. In my opinion, the second lien will protect you from the trustee's interest in the property. What if you settle now and the trustee gets an appraisal on your home and it's more than what you expected? You won't have that 2nd lien anymore and there may be equity. Then you will have a different problem. Do you know what the current value of your home is? We filed Ch7 and had three liens against the property. The trustee had no interest at all. After we were discharged I was able to settle with the third to release the lien for 1.5% because they had no equity. You will definitely have more leverage when you are discharged. To protect yourself, you should consult an attorney before making a decision. There has been a lot of good advice given to you on this forum. Do you have an attorney? If not, find a really great one and you will get the answers you need. We interviewed four attorneys before we hired ours. Remember, this forum is full of great support. People here are only trying to help you! Best of luck to you. Keep us posted.

[lulabelle]

If it wasn't obvious, I'm keeping the home and the 2nd (or it's lien) is not discharged in Ch7.

Now, do you have any constructive advice?

I'm confused - if the 2nd is not being discharged in the 7, are you then saying that the loan is not underwater and you have equity in your home? Cause I would love to settle my 2nd but didn't think that was an option when there was equity involved.

[tightrope]

I've deleted my last post.

Thanks to everyone for your replies and input.

[Mensa1]

Just the fact, that the same person who negotiated a great modification on my first, is working on my second.

And what, they are going out of business before you anticipate obtaining your discharge? What a shame.

Seriously tr, you have NO idea how you sound here. Not being judgmental, just objective. It is much like any one of us who hasn't quite taken full responsiblity for our situation, just before we get serious about filing for Bk. Eventually we all seem to get it, some it takes longer than others.

The other situation here, and this will be my last comment on this thread, is that the funds for settlement aren't your funds; parents, boss, et al. We have all been through it, spending other peoples money, but apparently you have just a little more blindness left in you.

Sorry for the judgmental opinion here tr, but it is abundently clear to us all. If you had (maturity, responsibility, self control, or ???) to wait this thing out until discharge, it would do you good... as well as the party bankrolling the buyout.

As stated, my last word on it. GL tr!!!!!!!

[pcn]

Sorry, thought you might have something substantive to add.

[tightrope]

What about your situation is causing the 2nd to be motivated to settle pre-bk?

Just the fact, that the same person who negotiated a great modification on my first, is working on my second.

[Overmylimit]

Why would any payment to a secured creditor be "undone"?

You are right, if you made a few extra payments towards your mortgage I don't think the Trustee would question it however If you come up with like 12k and fork it over to your mortgage company they are going to wonder what else you could come up with $$ for..

[walkthaplank]

It would be great, but I'm not necessarily looking for 2%, I'm just looking for an amount that is reasonable and I'm happy with.

As far as the advice given, except for Mensa1, who recommended that the money go directly to the mortgage bank, all I've heard is that settling after BK is better than before. Well, I already knew that!

But because I will settle before BK, I asked for advice on the best way to pay for this settlement before filing and how different payment options will affect my filing.

Again, the only specific suggestion was from Mensa1, and although he didn't expand, I assume the reason for direct transfer would be so the payment amount is not added to my income for the means test.

Others suggested that this payment would be "undone" but never explained on what grounds. Why would any payment to a secured creditor be "undone"?

My other option which I didn't mention would be to ask for my vacation pay and depositing that in my bank and paying form my own account.

So I would like to hear how these different payment options (from my original post), will affect my filing and why, and the best way to go about it.

Listen to the advice you are getting here. You are insisting on making a very poor decision here that will cost you substantially, maybe even jeopardizing your filing.

The transaction that would be undone is you paying back your relative. The trustee will tell you that you can either pay the trustee the amount you paid your relative or they will sue your relative to undo the transaction. Now you are paying that settlement amount twice. You are allowed to pay a secured creditor anything you want, you cannot pay an unsecured creditor a preferential payment. Your mortgage is secured, your relative is not.

If you get your vacation pay advanced to you, you may very well end up showing too much income pushing you into a CH13. If you pay off your second mortgage prior to filing BK, if your house ends up having equity in it that you cannot exempt, you may LOSE your house, or end up paying the equity that the trustee claims on your home.

Right now having this second mortgage hanging over your head actually helps your filing. Once that debt is discharged, then all you are doing is negotiating to purchase a worthless unenforceable lien.

If it is inevitable that you will be filing BK, consult with several lawyers and start the process before you make any more decisions regarding your finances.

[Apocalypse]

Remember too, that the Trustee gets a PORTION of whatever he is able to get from your estate beyond the filing. If he "FINDS MONEY" and that is his job, then his firm GETS TO KEEP a percentage of that. While they are supposed to be an advocate of th the debtor and the creditor, they are definitely always on the hunt for money, and if that means taking it from someone you made a biggg payment to (which is clearly preferential) I think he WILL. Just my opinion. Be smart.

[Apocalypse]

nicole, you are exactly right, it DOES vary by state, and you SHOULD check with your attorney. They are even knowledgeable about how THEIR trustees and judges typically react to things. It's craziness.

[Mensa1]

Again, the only specific suggestion was from Mensa1, and although he didn't expand, I assume the reason for direct transfer would be so the payment amount is not added to my income for the means test.

Others suggested that this payment would be "undone" but never explained on what grounds. Why would any payment to a secured creditor be "undone"?

My other option which I didn't mention would be to ask for my vacation pay and depositing that in my bank and paying form my own account.

tightrope: You should go ahead and do what you want to do here, especially the BOLD type above. THEN, the next time someone comes here and asks a similar quest of what to do and why or why not, you will be able to tell them FIRST HAND why NOT TO DO what you are about to do here.

You aren't really listening and you are entitled to that, but once the TT nails ya, you won't be happy anymore. (: Enuf said; naw, really too much said.

PS. (here I go again). Definition from the US Court site:

preference or preferential debt payment: A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor's chapter 7 case.

Do you see the word Secured or Unsecured anywhere in that def? I don't. Now, why wouldn't a TT be able to logically look at the 2nd mtg situation, see it is under h2o badly, and consider this transfer a preferential transfer? I don't know the answer to that question for sure, but I do know that the settlement you are proposing here fits the def of it being "more than the creditor would receive in the debtor's Ch 7 case".

From there, you decide... Is it an absolutely iron clad case that the TT will not be able to come after you for the pref transfer? I don't think that anyone can guarantee that fact, so you will have to determine if it is worth the risk... to get it off your mind. Or, as you stated, make you happy.