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Roger
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Category: Bankruptcy Law
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can I short sell my home during chapter 13 payment plan. the

Customer Question

can I short sell my home during chapter 13 payment plan.

the lender (Freddie Mac) is unable to approve a short sell during chapter 7 but has committed to do a short sale under chapter 13. I intend to convert 7 to 11.
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 3 years ago.

Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney here to assist you.

 

Yes, you can do a short sale while in a Chapter 13. There is nothing illegal or impossible about doing that.

 

Please let me know if you have additional questions.

Customer: replied 3 years ago.
this would be after agreeing to a payment plan would cure the delinquency and maintaining present payments. ?

I am delinquent at the point.
Expert:  Roger replied 3 years ago.

If you want to keep the property, you would enter into a payment plan that will repay any delinquency in addition to continuing to make the payments going forward.

Also, if you want to rid yourself of the property, you can engage a short sale.

Customer: replied 3 years ago.
Perceived Situation: a short sale may take 3 to 6 months to closing (including lender approval process). the period between creditor meeting and discharge is 60 days. so if i do not include mortgage in payment plan then the property will be surrendered and lender may foreclose in the middle of the short sale process. Correct?
Expert:  Roger replied 3 years ago.
This is possible. IF the lender doesn't agree to the short sale, it can foreclose at any time if the loan is not included in the repayment plan.
Customer: replied 3 years ago.
so to insure that i can 'settle my debt' with the lender and not have a foreclosure i would convert my chapter 7 to 13 and make payments (even though it would be difficult for us)?
Expert:  Roger replied 3 years ago.
Yes. The only way to ensure you aren't foreclosed on is to file chapter 13 and repay the arrearage and current payments under the plan.
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 27079
Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
Roger and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 3 years ago.
so if we can show ability to pay monthly payments that will cure our delinquency we could 'strip' the 2nd Trust Deed.

would the court 'strip' and discharge the second if it can be established that our income does not allow us to make the monthly payments.
Expert:  Roger replied 3 years ago.

You can only strip the second mortgage to the extent that it is unsecured.

For instance, if your home is worth $200,000 and your first mortgage is $175,000 and your second is $50,000, you could strip $25,000 and you'd have to pay the other $25,000 because the second mortgage is secured up to that amount.

The court must require payment of ALL secured debts. The only debts that you can try to cram down in a 13 are unsecured debts. However, unsecured debts would be paid to an amount equal to the exemptions you have - which are usually significant.

Customer: replied 3 years ago.
so in a short sale (upside down) home worth $100,000 First Trust Deed is $120,000 and second $80,000 2nd TD is stripped?
Expert:  Roger replied 3 years ago.
It would be considered an unsecured debt, but that doesn't mean you would not have to pay it back.

In a 13, unsecured debts are repaid up to the amount equal to your exemptions.

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