What if I told you you could get rid of your 2nd mortgage? That’s right – never make another payment and have the lien on your house completely removed! You would probably think that is too good to be true – right? Wrong!
It is possible to do exactly what I have outlined above utilizing the Chapter 13 process in bankruptcy. There are some “catches” that you need to be aware of. In order to “strip” strip a second (or third), you must show that your home’s value is not a SINGLE PENNY more than the balance due on your first mortgage. You must otherwise qualify for Chapter 13. Ask an attorney in your area about how to qualify for Chapter 13.
With property values at all time lows in most areas, if you are eligible to strip a lien in Chapter 13, it may be wise to consider that route. Many debtors who otherwise qualify for Chapter 7, could discharge a significantly higher percentage of their total debt in Chapter 13 and make their monthly budget more manageable now and for 15, 20, 30 years to come.
There are many techinical issues that are involved in the lien stripping process and you most certainly should seek experienced counsel to represent you. One issue that arose in one of my cases recently was, on what does is the property valued for purposes of determining value? After a bit of digging, this is what I came up with.
When BACPA was enacted, 506(a)(2) was changed to specifically designate the filing date as the valuation date for personal property. However, there is no code provision that speaks to the valuation date for real property. I think the majority of cases considering this issue have come out on the side of valuation as of the “effective date of the plan.”
This stems from the combined interpretation of two code sections – 506(a)(1), which provides in part “Such value shall be determined in light of the purpose of the valuation” and 1325(a)(5)(B)(ii) which provides “the value, as of the effective date of the plan, of property to be distributed . . ..” Read together, Courts find that the valuation date in 506(a)(1) is flexible depending on the purpose and that 1325(a)(5)(B)(ii) provides a date. The courts deciding in this way also emphasize that the amendments to 506(a)(2) regarding personal property seem to highlight the distinction in valuation dates.
While the intricacies of challenged lien stripping are intriguing for bankruptcy attorneys, the fact is, most junior liens are stripped without objection from the mortgage servicer or investor. This can result in a savings of tens of thousands of dollars over the life a loan, and provide you way to hold on to your home instead of giving it up in foreclosure!
Similar Posts:
- Can You Remove A Homeowners Assocation Lien from Your Home?
- How Bankruptcy Can Help With Foreclosure
- Sally Herigstad: 5 steps to take when debt collectors threaten to put a lien on your home, property
- Bankruptcy and Tax Debt: What Happens to Tax Debt in Bankruptcy
- Bankruptcy Laws: Helping to get out of debts
Tags:
Recent Comments