1st mortgage solved, here is the deal on the second

[ben1381]

Here is my latest story. I own home that I had appraised for BK purposes and real estate assessed value purposes at 215K. First mortgage with Citi is at 158K. After negotiating with Citi for over a year and even dealing with their executive response team and getting nothing I finally am getting a mod after a friend of mine who works for Citigroup got involved and put me in touch with a mortgage decision maker at Citimortgage. I am awaiting receipt of the mod papers any day. I also have a HELOC with Chase for 123K and about 110K in unsecured debt. I am planning to file Chapter 7 soon to deal with the unsecured debt and am applying for a mod from Chase on the HELOC. Now that I have a mod on the first getting a mod on the second I think is a lot easier. My BK lawyer wants me to file Chapter 7 after I sign the papers for the first mod but before the second mod is completed. I would like opinions on whether I should do this or wait until the second mod is completed before filing. RIght now there are NO active lawsuits against me(two were discontinued possibly due to creditor's lawyer error as well as an understanding from my lawyer that I would file BK) from CItibank credit cards but Amex CC is threatening to sue. I settled with Capital One CC making monthly payments until I file BK.

[StartingOver08]

lrprn is right. Also check out this publication...it will help with the form! lol

http://www.irs.gov/pub/irs-pdf/p4681.pdf

[lrprn]

I have heard of a form from the IRS to determine insolvancy without a BK but cannot locate it. Does anyone know the form #? Is there another way to prove insolvancy to the IRS?

The form is Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) - http://www.irs.gov/pub/irs-pdf/f982.pdf

You may also send the IRS a detailed letter with a financial statement showing your insolvency.

[spidge]

We've avoided bk by paying off our debt at 25% (credit cards) and our custom lot went away to the bank. Being insolvent means we will get 1099's but it won't matter.

I have heard of a form from the IRS to determine insolvancy without a BK but cannot locate it. Does anyone know the form #? Is there another way to prove insolvancy to the IRS?

[winona55987]

Is there a special phone number for Citi that can get this expediated?

[troubled]

My tale o' frustration...

So, after reading a lot of the info here I decided to try to work with BOA on a a loan mod for our second (Balloon with $93k left at 11.87%). After two months of calling them to follow-up on all the paperwork sent (and 4 months of not paying) finally got to the right person. They had never heard of our request. Went over everything with her then told our expenses are still too high to our income - of course she said if I sent them $2000 of the $4000 we are behind on it may help--um, no....

I've cut back a few things and I'm giving it another try this week. if it doesn't work I'll offer them a settlement %, which I would think they'd take since a foreclosure would lose them $$ (we still owe about $240k on the first and the house was appraised at $251,000 during the bk...

[BKINAZ]

BTW we have been doing mortgage mod since march. We missed our 3 payments (as told to do...which is the dumbest thing) and are now currently on our 3rd set of three payments. Our payments in the first set were reduced from $2,500 per month to $1,700...the second and now the third set was lowered to $1,395 which is where we were hoping to end up.

My guess is it'll be that price for 5 yrs and then go up 1-2% each year after never going above...6? (where we are now...might be lower...this is just a guess)

[BKINAZ]

Hang in there NOT...

JUST thanks! I was def. not being combative, just wanted to be clear on what I was hearing. I clearly wasn't. Though your answers were solid and I feel a bit better talking to my second tomorrow.

We've avoided bk by paying off our debt at 25% (credit cards) and our custom lot went away to the bank. Being insolvent means we will get 1099's but it won't matter. The only thing left is an $80k second...we've avoided bk thusfar...but if they push it, we may have no other choice...which would suck.

I'll update the response I get from the second...it's getting pretty close to d-day for them.

[notforsale]

Dealing with Citi on 2nd

I have been working with Wells for a mod on my 1st, during this time I was not paying anything to citi. Rather than talk to me they (citi) hired an atty and filed suit against me for default. I have since been able to pay enough to get them to reage and bring me current. They were not playing with the suit as I received all docs from our county courts to know this was no joke. I am waiting to file bk until after my mod with wells is complete. Currently have $130k in unsecured cc's non paid since Jan 09. Repo veh to local credit union balance of $5k. We owe wells $180k on the 1st and $43k to citi. Value of house around $200k, we want to keep the house after bk. I was planning to file and not reaffirm wells or citi and try to negotiate for 10% payoff of 2nd. Will this work?

[albacore44]

. They sell them to JDBs for 10% or less and just wipe their hands of the mess. The JDBs will put "light" pressure on your to pay, or will just sit on the debt waiting for the earlier of you selling the home, or the home appreciating... at which point they can foreclose!


No, they could sell it to a Junk Debt Buyer (JDB) for 10% (or less). The JDB just sits on it for years, until you go to sell! Then voila, you have to pay the JDB!

I have seen this scenario posted a few times, I sure would like to hear of some real examples of this happening, and which banks in particular are more likely to do it

[justbroke]

Time out...I still have to argue because well...I have been doing this for quite awhile (thinking about bk/research/lawyers) and EVERYONE has told me the opposite of what you just said. Actually...not the opposite.

Did you post this to me? If so, please re-read. I wrote that the lien stays their. Your personal liability goes away, but the lien certainly does stick, giving the junior lienholder an interest in the collateral.

But they made it clear...the 2nd does not go away and will indeed get some money from chapter 13 and is still owed in chapter 7. (I could have them flipped...it's been a little while since I looked at BK)

Let's be perfectly clear on how this works. In a Chapter 13 context, the 2nd "might" get some money. In my Chapter 13, my 2nd will receive nothing, unless I start earning a lot more money (which is unlikely). I'm in a 0% payment plan to unsecured creditors. So, they will get nothing. In the Chapter 13 context, the 2nd would only get payments as a secured creditor, if the lien is stripped and it is determined to be unsecured, by motion or complaint of the debtor. In other words, many 2nd mortgages survive as secured debt in a Chapter 13 and are paid just as normal. They are not relegated to unsecured status.

Now, for a Chapter 7, if you don't reaffirm or redeem the 2nd, then your personal liability is discharged. However, the lien is still there! The creditor could turn right around, after your discharge, and foreclose! The only reason why they don't these days... is the condition of the housing market. They sell them to JDBs for 10% or less and just wipe their hands of the mess. The JDBs will put "light" pressure on your to pay, or will just sit on the debt waiting for the earlier of you selling the home, or the home appreciating... at which point they can foreclose!

Regardless...you make it sound like they have the power of a credit card now, is that right? Yes...they could foreclose...but they get a house that is worth $100,000 less than is owed on it...so they don't do that, correct?

No, they have the power of a creditor with a properly recorded lien and have all rights you granted them for security in the collateral. They are and remain a secured creditor. See my previous paragraph for why they don't foreclose today.

So their only thing is to lose...everything (according to you) in BK or dealing with me?

No, they could sell it to a Junk Debt Buyer (JDB) for 10% (or less). The JDB just sits on it for years, until you go to sell! Then voila, you have to pay the JDB!

What are they settling for now? I have to have this conversation with my second in the next day or so.

The number 10% has been thrown around alot these days. They seem to jump at 10%, because they get less, usually, when selling to a JDB. So, if you can offer them 5% and they bite... excellent!

[BKINAZ]

Time out...I still have to argue because well...I have been doing this for quite awhile (thinking about bk/research/lawyers) and EVERYONE has told me the opposite of what you just said. Actually...not the opposite. But they made it clear...the 2nd does not go away and will indeed get some money from chapter 13 and is still owed in chapter 7. (I could have them flipped...it's been a little while since I looked at BK)

Regardless...you make it sound like they have the power of a credit card now, is that right? Yes...they could foreclose...but they get a house that is worth $100,000 less than is owed on it...so they don't do that, correct?

So their only thing is to lose...everything (according to you) in BK or dealing with me?

Tell me more.

What are they settling for now? I have to have this conversation with my second in the next day or so.

"Relief" in this thread said they were considering her offer...but she never said what that was.

[justbroke]

Wait a second. GMAC is your second??? How is that an unsecured loan that you can dump in BK? You can't, all seconds are protected in BK aren't they?

While there is a lien, it is considered undersecured or wholly unsecured when there is not enough value in the property. That does not, in any way, automatically remove your pledge of the property as collateral for the loan. In other words, there's still a lien, regardless of value! The trick is, that the junior lienholders know that it's undersecured and want to get "something" back. Their only other choice is foreclosure, which really nets them nothing (and more losses from pursuing the foreclosure action). That's why they are wheeling and dealing these days, rather than have people go into Bankruptcy and discharge the whole debt and walk away!

[BKINAZ]

Spoke to GMAC this morning. I offered them a 5% buyout of the lien. They came back instantly at 10%. Telling me it is a great deal, etc etc. I told them they will get far less from a JDB or litigating. That the debt is basically an unsecured loan which I can BK. Said I would think about the 10%, but we need to get closer to 5%...

Wait a second. GMAC is your second??? How is that an unsecured loan that you can dump in BK? You can't, all seconds are protected in BK aren't they?

That part aside...please tell me is that your second and they really came back at 10%? We have gone the route of our bank (second) putting us into collection and being done with us. It's now in the mafia section of the bank and they have been taking $250 payments for the last few months, but they said they won't forever. I think forever is today or next month. So I will be hitting them with a settlement.

SPIDGE "Also one of the posters mentioned settling with payments within a year. Wouldn't that be admitting to the ability to make a payment?

I didn't see where that was written...but 9 out of 10 times you tell them you are getting the money from relatives to pay. In fact I say that and then say "they will not pay anything, unless it is to pay something off."

[Lajazz947]

Opps - sorry. Drinks for all the BK forum members in the IE. OMG that would be a blast!

Can I come too?

I am in LA but I will gladly make the drive.