How to Strip Second Lien on Your Mortgage?

[The Law office of Malik W. Ahmad www.fastbankruptcynevada.com provides free bankruptcy consultation to all of our clients at this time. An immediate request can be made by calling (702) 270-9100. Most of the time, same day appointments can be made with our law office.]

Can your second lien be wholly stripped?
The real estate bonanza and the bubble was created with the arsenal of second trust deeds, HELOC (home lines of equity) and even a third lines of equity to continuously fuel the perpetual boom. Along the way, lot of greed, deception and other malpractice also was added by mortgagors, loan servicers, lenders and of course unscrupulous loan officers. However, the real estate crashed and homeowners are walking away in droves from their erstwhile American dream. Unfortunate, as it is, something has to be done for folks who has somewhat equity left in their homes and can still pay their principal mortgage payments yet cannot afford paying the second mortgage or HELOC loan.

This is a widespread dilemma in Nevada which is still very high in the foreclosure statistics in USA. Let us analyze this matter Let us say the value of the falls very low and the house is worth less than the balance of the original and principal mortgage, the second mortgage or HELOC can be “stripped off”, in a chapter 13 bankruptcy. This second becomes unsecured debt and can be extinguished if someone files chapter 13 bankruptcy and fulfills other parameters.

The parameters are as follows:
– First, the debtor must complete the chapter 13 plan. This means that the consumer must make payments to the chapter 13 trustee for at least 3 years (more often 5 years). If for some unforeseen reason, the consumer is unable to complete the plan, then the lien strip fails and it regains its secured status. Second, a stripped lien losses its secured interest, but it the second mortgage lender must still be paid as an unsecured creditor. This means that the second mortgage will be paid a percentage of its balance over the life of the chapter 13 plan.

– Stripping a second mortgage in a chapter 7 is a more powerful remedy in a chapter 7. In a chapter 7 bankruptcy, all unsecured liabilities are discharged upon completion of the case. The second mortgage would get nothing. If the consumer decided to sell the property down the road, they would not have to payoff the second mortgage to complete the closing.

This issue came up before a bankruptcy judge (Honorable Dorothy T. Eisenberg, United States Bankruptcy Judge)

At issue is whether a second mortgage that is wholly unsecured by virtue of the first mortgage exceeding the value of the property may be “stripped off” pursuant to 11 U.S.C. 506(d). The Court has jurisdiction pursuant to 28 U.S.C. § 1334(a) and (b). This contested matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (K), and (O) and 11 U.S.C. §§ 105(a) and 506. The following constitutes the Court’s finding of fact and conclusions of law.

FACTS The Debtors filed for bankruptcy relief under chapter 7 of the Bankruptcy Code on April 9, 2009. The Debtors obtained their discharge on July 8, 2009.

The Debtors reside at a home in Levittown, New York (the “Property”). The Property is owned by the debtor husband. The Debtors listed the Property in their Schedules A and D to the bankruptcy petition as having a value of $400,000. The Debtors listed a first mortgage against the Property held by Bank of America, N.A. (“BOA”) in the amount of $411,183 on the petition date and a second mortgage also held by Bank of America in the amount of $9,904. As of May 2009, the outstanding balance on the second mortgage has grown to $10,127.99.

On May 12, 2009, BOA filed a motion seeking relief from stay, based on their second mortgage lien, in order to commence foreclosure proceedings on the basis that, inter alia, the Debtors have no equity in the Property. On June 1, 2009, the Debtors filed opposition to the motion for relief from stay and a cross motion seeking to avoid Bank of America’s second lien on the basis that under 11 U.S.C. § 506(a), a creditor has a secured claim only to the extent of the value of its collateral and an unsecured claim for the balance. Because the second mortgage is fully unsecured, no one challenges the fact that there is no value in the property beyond the first allowed secured claim and thus, under § 506(d), such an unsecured claim is not a lien against the property and, therefore, such lien is void. Although this is a chapter 7 case, the Debtors argue that the ability of the Court to modify wholly unsecured liens against a debtor’s residence in a chapter 13 case under 11 U.S.C. § 1322(b)(2) should be extended to chapter 7 cases because (1) there is no reason why unsecured liens can only be “stripped off” in a chapter 13 case and not in a chapter 7 and (2) the Debtors could obtain such relief by putting the Property into foreclosure and then immediately filing a chapter 13 case to achieve the same result.

Bank of America filed opposition to the Debtors’ cross-motion on July 30, 2009. A hearing was held on September 22, 2009. At the hearing, the Debtors concede that notwithstanding their cross-motion, the automatic stay did not apply to Bank of America’s attempts to proceed with a foreclosure sale because the automatic stay terminated upon the Debtors obtaining their discharge of debt on July 8, 2009. Bank of America is awaiting this Court’s decision as to whether this wholly unsecured lien can be “stripped off”.

DISCUSSION
The Court notes that the Debtors’ application should have been brought as an adversary proceeding rather than by motion, as Rule 7001(2) of the Federal Rules of Bankruptcy Procedures provides that an adversary proceeding includes “a proceeding to determine the validity, priority, or extent of a lien or other interest in property, other than a proceeding under Rule 4003(f).”
Notwithstanding the inappropriate form of the application for the relief sought, the Debtors seek to avoid BOA’s wholly unsecured second mortgage lien on the Property based upon 11 U.S.C. §§ 506 (a) and (d). In effect, the Debtors are objecting to the claim filed and allowed only as an unsecured claim.

Section 506 provides in relevant part:
(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property and is an unsecured claim to the extent that the value of such creditor’s interest is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.” . . .

(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless – (1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or (2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title. 11 U.S.C. §§ 506 (a)(1), (d)(1-2). None of the exceptions to § 506(d) are applicable in this case.
The issues before the Court are: (1) whether BOA’s mortgage lien is an allowable secured claim; and (2) if it is not an allowed secured claim, can the lien be stripped off as a
secured claim pursuant to sections 506(a) and 506(b).

Section 502 provides in relevant part:
(a) A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest, including a creditor of a general partner in a partnership that is a debtor in a case under chapter 7 of this title, objects.

(b) Except as provided in subsections (e)(2), (f), (g), (h) and (i) of this section, if such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that–(b)(1) [S]uch claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.
11 U.S.C. §§502 (a)-(b)(1). The Debtors argue that because a creditor’s lien on property is secured only to the extent of the value of such creditor’s interest where the creditor is wholly unsecured under § 506(a), then such lien is void under § 506(d), because it is not an “allowed secured claim.” BOA’s response relies on the U.S. Supreme Court’s decision in Dewsnup v. Timm, 502 U.S. 410 (1992).

After § 506 was enacted into the Bankruptcy Code in 1984, courts generally held that “the plain language of § 506(a) meant that a creditor held a secured claim for the amount of the lien up to the value of the collateral and an unsecured claim for any amount of the lien over the amount of the value of the collateral.” In re Smith, 247 B.R. 191, 195 (W.D. Va. 2000) (quoting Crossroads of Hillsville v. Payne, 179 B.R. 486, 490 (W.D. Va. 1995)). These courts further held that according to the plain language of § 506(d), the unsecured portion of a creditor’s lien is to be voided. See In re Folendore, 862 F.2d 1537 (11th Cir. 1989); In re Mays, 85 B.R. 955 (Bankr.E.D. Pa. 1988); In re Lindsey, 823 F.2d 189 (7th Cir. 1987); In re O’Leary, 75 B.R. 881 (Bankr. D. Or. 1987). When a lien is voided, any post-petition property appreciation inures to the benefit of the debtor under bankruptcy fresh start principles. See In re Crouch, 76 B.R. 91 (Bankr. W.D. Va. 1987).

Analysis of Dewsnup
In Dewsnup, the only mortgage on debtor’s property was partially secured. The issue in that case was whether it was proper to strip off the unsecured portion of the claim held by the mortgagee. The Court held that there is ambiguity in the text, and it is uncertain whether the words “allowed secured claim” in § 506(d) has the same meaning as in § 506(a). Id. at 417. Given such ambiguity, the Court was not convinced that Congress intended to depart from the opinion, the Supreme Court held that § 506(d) did not apply to a first lien securing a claim that
was fully allowed under 11 U.S.C. § 502, but rather only voids claims that have not been allowed
as secured.

Justice Scalia, joined by Justice Souter, strongly dissented, arguing that:
Read naturally and in accordance with other provisions of the statute, [506(d)] automatically voids a lien to the extent the claim it secures is not both an “allowed claim” and a “secured claim” under the Code. In holding otherwise, the Court replaces what Congress said with what it thinks Congress ought to have said — and in the process disregards, and hence impairs for future use, well established principles of statutory construction.
Id. at 420 (Scalia, J., dissenting). Section 506(a) says that an “allowed claim” is also a “secured claim” ‘to the extent of the value of [the] creditor’s interest in the estate’s interest in [the securing] property.’ Id. at 420-21 (quoting United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 239, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989)).
Justice Scalia further points out that the phrase “allowed secured claim[s]” used in other subsections of § 506 and in other Bankruptcy Code sections invariably means what § 506(a) describes: “the portion of a creditors allowed claim that is secured after the calculation required by that provision have been performed.” Id. at 421. See 11 U.S.C. § 506(b); 11 U.S.C. § 722; 11 U.S.C. § 1225(a)(5); 11 U.S.C. § 1325(a)(5).

Justice Scalia further asserts that the Supreme Court holds that plain meaning of the Bankruptcy Code is dispositive to the exclusion of legislative history and judicial policy considerations. See Ron Pair Enterprises, Inc., 489 U.S. at 241. When the words of a statute are unambiguous, then, this first canon is also the last: ‘judicial inquiry is complete.’ Rubin v. United
While Dewsnup is subject to substantial judicial and scholarly criticism, “it remains the law of the land”. In re Cunningham, 246 B.R. 241, 246 (Bankr. D. Md. 2000) (citing Lawrence Ponoroff & F. Stephen Knippenberg, The Immovable Object Versus the Irresistible Force: Rethinking the Relationship Between Secured Credit and Bankruptcy Policy, 95 MICH. L. REV. 2234 (1997); Margaret Howard, Secured Claims in Bankruptcy: An Essay on Missing the Point, 23 CAP. U. L. REV. 313 (1994); Barry E. Adler, Creditors Rights After Johnson and Dewsnup, 10 BANKR. DEV. J. 1 (1993); Margaret Howard, Dewsnupping the Bankruptcy Code, 1 J. BANKR. L. & PRAC. 513 (1992)).
Distinguishing DewsnupHowever, Dewsnup is not applicable to every permutation of § 506(d) cases, as Dewsnup itself stated, “we therefore focus upon the case before us and allow other facts to await their legal resolution on another day.” Dewsnup, 502 U.S. at 416-17 (majority opinion).

The Debtor distinguishes Dewsnup from the present case advancing two arguments. First, Dewsnup holds that a Chapter 7 debtor may not “strip down” a first mortgage to the fair market value of the property. Second, Dewsnup disallowed a “strip down”; it did not address a “strip off”, which would remove a wholly unsecured junior lien, as opposed to a “strip down”, which reduces an under-secured lien to the fair market value of the collateral. In re Arrieta, No. 09 B 12052, 2009 Bankr. LEXIS 1683, at *2 – 3 (Bankr. N.D. Ill. June 22, 2009). Here, the Bank of America second mortgage is wholly unsecured, because the value of the collateral does not even secure the entire first mortgage lien. Debtor therefore argues that the wholly unsecured second lien is voidable under § 506(d), and should be “stripped off”.

While the Debtor’s first argument, that Dewsnup dealt with first mortgage liens is mortgage is different than a first mortgage under Dewsnup. If any part of the second mortgage lien is secured by some property, there is no authority that supports holding second mortgages to be outside of Dewsnup. There is no distinction based on Dewsnupthat stripping down a second mortgage is different than stripping down a first mortgage. In re Poirier, 214 B.R. 528, 529 (Bankr. D. Conn. 1997) (citing In re Willis, 157 B.R. 617, 621 (Bankr. N.D. Ohio 1993) (holding that under Dewsnup, the debtor could not avoid an allowed second mortgage under § 506(d), even though little or no equity remained in the property for the second mortgagee)). As long as the second mortgage had any value, Dewsnup would apply. Debtor’s second argument, distinguishing the instant case from Dewsnup because the second mortgage is wholly unsecured, is the issue before this Court.
Treatment of wholly unsecured consensual liens by other courts

Since Dewsnup, the issue of whether wholly unsecured liens with respect to consensual loans may be “stripped off”, as opposed to “stripped down” as addressed byDewsnup, has been a contentious issue between various bankruptcy and district courts and their respective Courts of Appeals.
The Fourth, Sixth and Ninth Circuits apply Dewsnup equally to both stripping down and stripping off of consensual liens. See Ryan v. Homecomings Fin. Network, 253 F.3d 778 (4th Cir. 2001); Talbert v. City Mortgage Servs., 344 F.3d 555 (6th Cir. 2003); In re Laskin, 222 B.R. 872
(B.A.P. 9th Cir. 1998).

In Dewsnup, where a portion of the value of the claim at issue exceeded the value of the property, the claim was both 1) allowed and 2) secured, albeit undersecured, for purposes of § 506(d). Because part of the claim was secured, it was considered a “secured claim” under § 506(d). However, where the claims are totally unsecured, there is no equity whatsoever for the junior lien to attach for purposes of § 506(a) because a creditor’s claim is secured only “to the extent of the value of such creditor’s interest in such property”. With respect to a wholly unsecured lien, the creditor de facto only has an unsecured claim under § 506(a). Accordingly, the wholly unsecured claims cannot qualify as “allowed secured claims” under § 506(d), and must be voided. In re Zempel, 244 B.R. 625, 629-30 (Bankr. W.D. Ky. 1999).

In regard to Chapter 13, the Supreme Court in Nobelman, Nobelman v. American Savings Bank, 508 U.S. 324 (1993), held that § 1322(b)(2) barred a Chapter 13 debtor from relying on § 506(a) to bifurcate an undersecured homestead mortgage to secured and unsecured components. In reaching this conclusion, the Supreme Court held it appropriate to look to § 506(a) as a preliminary matter to determine whether the claim in question was secured. See id. at 328-32. Because the mortgage in Nobleman was partially secured, under § 1322(b)(2) the claim is considered secured and may not be modified. This is consistent with Dewsnup. However, Nobelman is only applicable where the collateral retains some value. If the creditors are wholly unsecured under § 506(a), than § 1322(b)(2) will allow a debtor to reduce the claim to a general unsecured claim. In re Yi, 219 B.R. 394, 399 (E.D. Va. 1998)(citing Wright v. Commercial Credit Corp., 178 B.R. 703, 706-07 (E.D. Va 2005)); See In re Geyer, 203 B.R. 726, 729 (holding that “unless there is some equity to which a creditor’s lien attaches, there is no allowed secured claim” under § 506(a)). The majority of circuits and bankruptcy courts limit Nobelman to a partially secured lien. Where the creditors are wholly unsecured, looking first to § 506(a), the lien that is wholly without equity is an unsecured claim, and thus open to being void under § 506(d), and § 1322(b)(2) does not bar modification of a wholly unsecured lien. See In re Zimmer, McDonald, 205 F.3d 606, 615 (3d Cir. 2000); In re Tanner, 217 F.3d 1357 (11th Cir. 2000); In re Mann, 249 B.R. 831, 840 (B.A.P. 1st Cir. 2000); First Mariner Bank v. Johnson, 411 B.R. 221, 224-225 (D. Md. 2009); In re Sette, 164 B.R. 453, 456 (Bankr. E.D.N.Y. 1994); In re Hornes, 160 B.R. 709 (Bankr. D. Conn. 1993). These holdings in a Chapter 13 context clearly demonstrate that under the Code it is appropriate under § 506(a) and § 506(d) to distinguish partially secured liens from wholly unsecured liens. Once it is established that Dewsnup is distinguished, there is no reason why in a Chapter 7 context the same language in §§ 506(a) and (d) should not void the lien of a wholly unsecured claim.

The present case is easily distinguished from Dewsnup, therefore the wholly unsecured lien cannot qualify as an “allowed secured claim” under § 506(a), and is void under § 506(d). First, the Bank of America second mortgage cannot be considered a secured claim under § 506(a), because the junior claim is wholly unsecured. Accordingly, the plain meaning of § 506(d) requires the lien to be voided. Second, the Supreme Court itself limited Dewsnup to its specific facts, and in light of the persuasive argument of Justice Scalia in the dissent regarding the requirement to interpret a seemingly unambiguous statute according to its plain textual meaning, Dewsnup should be narrowly interpreted. Because this case is substantially distinguished from Dewsnup, there is no reason for this Court to read § 506(a) and § 506(d) in any way other than their plain textual meaning. The plain meaning is applied to Chapter 13 section 1322(b)(2) analysis where the lien is wholly unsecured, and there is no logical reason to read the text differently when applied to Chapter 7 wholly unsecured liens.

Arguments that debtors will benefit from possible windfalls, are not persuasive. Markets are uncertain, and it is not certain such a scenario will ever occur. Secondly, the creditors’ right
the property for them. Bankruptcy is not intended to benefit either the creditor in securing a potential increase in property value, or the debtor. However, where the future is unknown, bankruptcy principles of giving the debtor a fresh start should apply. While these issues of debtors’ and creditors’ rights are the subject of long standing philosophical debate, in light of the unambiguous, clear language of §§ 506(a) and (d), § 506(d) requires this Court to void the lien as a matter of law regardless of any possible further potential debtor benefits.

CONCLUSION
BOA’s second mortgage claim is not an allowed secured claim pursuant to section 502 of the Bankruptcy Code, since it has no collateral to support its claim. It is an allowed unsecured claim. Based upon the foregoing, the Debtors’ cross-motion to void Bank of America’s second mortgage lien pursuant to 11 U.S.C. §§ 506(a) and 506(d) against the Property is granted. So ordered.

28 Comments

  1. I filed Bankruptcy pro se in 2009. I got a 727 title 11 Discharge. I am being contacted by a Agent for Chase. They are trying to collect a lien. It was a Heloc loan. There is no equity in the property. can I File a motion to void the lien. Do I do it in Bankruptcy court or just at the county courthouse? I am in Ohio.
    Your Feedback would be greatly appreciated.
    Thank You.

  2. It is a real pleasure for me to visit your blog and to enjoy your marvelous post here. I like that very much. I can see that you paid much attention for those posts, as all of them make sense and are very useful. Thank you very much for sharing. I can be very good reader & listener. Appreciate your work!

  3. Just looking for a little clarification. I filed a Chapter 7 where I was released from the debt of a second lien. Upon filing the Chapter 7 the property had not equity. The second lien remains on title. If I am reading the court option correctly it is stating that the second lien is void if the property did not have adequate value upon the discharged eventhough it was a secured second lien. Is my interpetation correct?

    • When you are released from second lien, it means that you do not have to pay the financial liability on the second lien. However, you are discharged the financial part of it, and a lien does stay on the property. Let us say that the property acquires equity in due course, then this lien would be revived again, and you had to pay the financial part of it. If, however, there is no equity, then you do not have to pay. Again, the lender do have a lien but they cannot enforce it because there is no money they can get in enforcement.

    • Second lien has to be on the schedules if requires to be discharged. What exactly has your attorney done: (1)Reaffirm, (2)Continue making monthly payments, (3)Surrender. You had (or your attorney need to pick one option. If not reaffirmed, it should be considered surrendered, but at least needed mentioning in the schedules. This again is answered as an academic question, and not to your particular situation

  4. You state that lien stripping in a Chapter 7 is a “powerful remedy”. Can you cite to a Reported decisions that confirm your assertion? The case you refer to is a 2009 unreported decision that has been severely criticized by at least two other Judges in the same district.

    Thank you.

  5. Filed a C7. !st mortgage in foreclosure working on home mod. Have a second mtg. And HO Assoc. has a lien on the property. I owe about $100k more than the home value. If the mod works out will the second or te HOA have a shot at foreclosure? I live in Ohio. look forward to your reply.

    Thanks

  6. I am going to have to file Ch7 in AZ. I need to keep my house for my work purposes. I re-modified my first successfully but owe $256,000 on my second. My fist is $265,000 with lower interest. The house is worth between $200,000-$250,000. I understand that if I am upside down that I might lose it in a Ch7. I understand what you are saying about the second lien stripping but want to know if I will stand a good chance of keeping my house based on the numbers given? When the court looks at the value and balance against it, does the balance include the second mortgage amount or just the first mortage?
    What is the base number for keeping your house if you are underwater in a Ch7? Thank you,

    • Every state including Arizona had legislated homestead laws. Because I am not licensed in the state of Arizona, so I cannot give you answer to that subject matter. You can safeguard your home in chapter 7. The balance only includes the first mortgage because that is secured. If a home is foreclosed, the second would become an unsecured debt and would not be attached with the collateral. Again, there is no base number, and I am sure that your home is protected under Arizona laws.

  7. I have a dilema, at least I think so. My biz went down with the economy bust, and being a bit older I could not find a job (have one now) in that time I used what savings I had to keep afloat. I have begun the process and had the first meeting of chap 13 with a second to occur. But it seems that 13 with a second stripped (hopefully) leaves me in the charge of the court for 5 years. In filing 13 the purpose was to keep the home, I was 2 payments behind but now have the cash to bring the first up to date. The house is worth less than the loan amount. The rest of the debt that I wish to eliminate is really credit issues from my failed company, unsecured of course, mostly credit card debt.
    However there are indications that moving forward my lot in life will improve, have a better job now, and have a few more business issues that will arise in the next few months that “might” be very positive.
    I was told I could not strip the 2nd on a 7 filing, so hence the 13, but if indeed things do turn around for me then it seems that any gain will be lost by payment to the court. I assume I will be paying less than owed over time but if the 2nd could be stripped in 7 and other debts discharged, I would be in a much better position to move forward. Its almost like 13 says, keep the conditions the same, just get by, where as 7 says, ok clean start, and you move forward. I have the background to make a new company, a new place for employees etc, but now with 13 there seems to be a potential of paying back a greater percentage than chapter 7 would provide. I am sure that from an emotional stand point I could have managed affairs better but, that is not the case. I do not think that the attorney of record at the present time ever considered the information you provided. I want to be positive and start over, had the decline not occurred I would not be in this quandary. Even more I feel the information that I have been given by present council is not as comprehensive as I would like. I am issuing no negative remarks to ward them but I feel that they may be more of a paper mill processor than a comprehensive legal service. It is my own ignorance that has put me in this situation but I feel I need very qualified representation. It is very difficult to know where to turn for help and whats more when you do make that decision you are never totally sure that is was indeed the right one.

    I want to keep my home, I want to strip the second and I want to eliminate the unsecured debt. Can this be done in Nevada.
    Thanks for your comments

    • This is a very long and fact specific case. I suggest you should have asked these questions from your attorney. Of course, he is duty bound to answer these, or should have answered you prior to filing. Anyway, I would just answer them in an academic sense only.

      I want to keep my home, I want to strip the second and I want to eliminate the unsecured debt. Can this be done in Nevada.
      Thanks for your comments

      Your Home: It is an exempt asset under the Homestead laws of Nevada. You can protect your primary home upto $550,000 worth of equity. Of course, it is difficult to find home with that much equity. Bottom line, you are protected, and can save your home.

      I want to strip the second: The word stripping is only limited to Chapter 13. However, you can extinguish the financial part in Chapter 7 but lien would remain. Please read my relevant article in one of my blog.

      Can you chapter be changed to 7?
      Of course, it is feasible. But honestly, and no disrespect to anyone here, why do you hire a nincompoop, dump-truck attorney in the first place, and don’t discuss all the scenarios with him/here? I had seen innumerable cases where clients sole motive is to find the cheapest possible bankruptcy attorney who only filles in the blank, and files electronically and then disappear from the scene.

  8. MALIK
    Indeed a nincompoop might be the appropriate phrase for this firm. The issue is one of ignorance, I did NOT seek out the least expensive alternative, I have already invested 2K in this effort, and the firm will through 13 gain more over the coming years of court management.

    However I did ask many questions, and I was given answers to the pain of the situation, such as STRIPPING the second, a real pain point for me and in my opinion the firm retained sensed that and focused on getting the issue in hand quickly in order to get the filing done.

    I am sure you would never do this filling in the blanks effort, I am sure you are a detailed legal council who would do the best thing. BUT you miss the point, people at the beginning do not have any idea what so ever of the questions to ask, you only find these questions as time progresses forward in the case. I am not sure that any law firm would take the proactive stance of helping people before they file in a way that would make them very secure that the path they choose is proper and well considered.

    Your web sight suggested that you indeed might be the kind of lawyer that would help in this way. I note that your website is fastbankruptcy,com seems that you might likewise be a lawyer that is very efficient at filling out papers.

    I will move forward as best I can and try to make the right decisions going forward.

    A final note, I would offer this to you as a professional in the media and web business helping clients achieve a professional and productive internet marketing foot print. Who ever has constructed your web site is potentially as you said a nincompoop, the site itself is horrid if you want a real site that will increase your business, please feel free to email me directly and we can meet to discuss both of our issues, I fear fixing your problems will be much easier than fixing mine.

    • First of all, ask yourself the question if you have the patience and affordability to continue for the completion of the Payment Plan. I do advise clients otherwise. I have lots of senior folks who were very disciplined in their earlier part of lives, and now making lots of mistakes when confronting financial matters. One continuous mistake is borrowing from relatives or from their IRA and paying the delinquent mortgage payments to their lenders. This is a classic NO NO. No need to suffer and wait for a Payment Plan to complete. Normally, a Payment Plan can be either for 36 or 60 months. That is awful lot of time, and property may not recover during this time. It is good idea to change it to chapter 7, home should be an exempt asset. Lenders are tired of coming for the second, they know people have no money to pay, they may do some empty rhetoric, and then send you some serious offers to negotiate. It is up to you accept them or just ignore them. No one has ever been able to collect any money from a bankruptcy person. I also had seen payments made for the initial few years and than the debtor just can’t find money and then tried to convert to Chapter 7. It is not late but what good, you already had lost good size of money by paying to your creditors. Oh yes, one more thing, and that is very very despicable. Most of these TV-type attorneys pushes clients toward Chapter 13, unfortunate, as it is, as they make more money. Yes, I had seen at least five such cases where clients did not have no secured debts (i.e. home) but have judgment creditors haunting them with a small judgment less than 10,000 and these attorneys steered them toward filing chapter 13. They clearly qualified (one is a pool attendant making $13.00 an hour) for chapter 7. I asked him to send a letter to his attorney about this, they refunded all of his money so that he could be hushed by not going forward. Secondly, it is a very bad idea for senior citizen to file Chapter 13 because if they are earning social security, that part is protected and cannot be garnished under the Federal laws. in the 341 meetings, I just feel disgusted how senior citizens are wrongfully advised in such matters.

      Thanks for tip on my website. I have been duped many times by these Experts from the Craiglist, and someone is still doing it at this time. I hope it would be better than before. I learn from my mistakes but it turn it make different mistakes of my own.

  9. I filed a ch. 7 and reaffirmed my mortgage but surrendered the 2nd.
    House is worth $120,000
    1st mortgage $129,900
    2nd mortgage $31,000
    I went to sell my house got a buyer and got to closing and the closing attorney said there was a deed in trust at the court house for $31,000
    I file bankruptcy 3 and a half yrs. ago and have not made one payment to that 2nd mortgage, I thought it was gone after my bankruptcy. Now they are saying I can not close until I pay it off!!!! How can I strip it or get the deed released?

  10. Thank you so much for this blog. Similar to the cases you’ve discussed here, my second mortgage was discharged in chapter 7 bankruptcy. The 2nd mortgage creditor contacted me few months after the discharge to “remind me” of the subsistence of the 2nd mortgage lien. On inspection of my chap 7 schedules, I noticed that the 2nd mortgage was listed under unsecured debt. I just wonder if stripping would have been possible under chapter 7 had I listed the 2nd mortgage under the secured debt section?

    • Any secured debt under Chapter 7 has to be either reaffirmed, redeemed or surrendered. Here, it seems it was part of unsecured debt. So, it is surrendered. In fact, under the strict interpretation of Bankruptcy laws, if it is not reaffirmed, it is deemed to be surrendered, and one is not liable. Further, there is no cramdown in Chapter 7. You only have a lien but no financial responsibility. If your lender contact you again, tell them it was part of bankruptcy, and don’t mess with you anymore.

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