Lien Survives after BK?

[highlife]

We have recived different opionons from different attorneys, so I am posing this question to the forum.

We have a first of about $125, a second of about $160, and a third (lein from business loan) of $570. House is worth around $290.

Since it covers the first and second, and there is a little left for the third, I am being told this could not be stripped in a 13. If we file a 7 we have enough exemptions to keep the house, but what happens to the lien from the third? Can they come back to foreclose later on (years) after the BK? Just an odd situation, and not sure of our options.

Also, if we are able to get an appraisal that would put us under the first and second, we could have the third stripped in a 13, correct? However, since we are so close, and are bank with the third would get treated as an unsecured creditor in that case, how likely are they to fight and/or win constesting the apprasial amount?

Just seems like we are caught between a rock and a hard place on this one. We can keep the house with the exemptions, but not sure what happens to the lien in either a 7 or 13. Any advice would be appreciated.

[justbroke]

We have a first of about $125, a second of about $160, and a third (lein from business loan) of $570. House is worth around $290.

Okay.

Since it covers the first and second, and there is a little left for the third, I am being told this could not be stripped in a 13.

True. The total value of the home cannot secure even $1 of a subordinate lien (mortgage) in order to strip the lien in a Chapter 13.

If we file a 7 we have enough exemptions to keep the house, but what happens to the lien from the third? Can they come back to foreclose later on (years) after the BK? Just an odd situation, and not sure of our options.

Liens survive bankruptcy unless stripped. You can't strip the lien in a Chapter 7 (unless there's some real impairment or a question of standing to challenge if the creditor(s) really has a valid lien). There are no exemptions that would avoid a lien except where a lien impairs exemptions on "household" goods. In other words... even though you could go through Chapter 7 and discharge the debt associated with those mortgages, the liens remain in tact and the lender has full ability to enforce its non-bankruptcy rights to foreclose. They just can't demand money from you.

Also, if we are able to get an appraisal that would put us under the first and second, we could have the third stripped in a 13, correct?

Yes.

However, since we are so close, and are bank with the third would get treated as an unsecured creditor in that case, how likely are they to fight and/or win constesting the apprasial amount?

Some fight and some don't. No one can tell you whether it will be a fight or now. The closer that it is to the value, the more likely the creditor would challenge the valuation.

Just seems like we are caught between a rock and a hard place on this one. We can keep the house with the exemptions, but not sure what happens to the lien in either a 7 or 13. Any advice would be appreciated.

You may just want to give up the home. Too many people try to hold onto something that's just a pile of wood, stone, masonry, (Chinese) drywall, glass, and pipes. Never try to save your home when you're, in your case, more than 60% underwater... unless you're in a Chapter 13, can strip the 60% chunk, and it makes financial sense to do so.

It's a business decision.

It's a business decision.

It's a business decision.

[highlife]

Thanks for the feedback.

If we decide to give up the home, what happens to the lien, or the amount left over from that lien?

Would that debt still follow me, assuming it is not discharged in the BK. (I am assuming BK is going to file an AP saying I gave them a misrepresented inventory listing AFTER our loan was opened.


Also, can you give up an asset (house) in a CH13? Just wondering?

[justbroke]

If we decide to give up the home, what happens to the lien, or the amount left over from that lien?

The liens will either be satisfied by the sale, or come "short" and cause a deficiency. If you discharge your financial responsibility for all the "secured" debt against the home, then you're not responsible to pay it back.

Would that debt still follow me, assuming it is not discharged in the BK. (I am assuming BK is going to file an AP saying I gave them a misrepresented inventory listing AFTER our loan was opened.

I would stop applying "what if" scenarios. It will probably just be discharged. As you assume, the only thing they could do it file an AP, and prove that you committed fraud.

Also, can you give up an asset (house) in a CH13? Just wondering?

Absolutely yes.