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WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 15874
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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If I convert a chapter 13 bankruptcy to a chapter 7, will this

Resolved Question:

If I convert a chapter 13 bankruptcy to a chapter 7, will this stop a sheriff's sale that is scheduled for this week?

If so, will the Bankruptcy trustee then sell the property and pay off the first mortgage?

The sheriff's sale foreclosure action is brought by the second mortgage holder who has no equity. They have not listed the first mortgage as a prior for the sheriff's sale nor did they notify me or the first mortgage holder that they had motioned for an extension to a writ of execution that had expired.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  WALLSTREETESQ replied 1 year ago.

WALLSTREETESQ :

Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarification.

WALLSTREETESQ :

A conversion to a chapter 7 will not distinguish the automatic stay, the automatic stay would still be in affect, and the sherriff sale could not happen.

WALLSTREETESQ :

Another option you can try is to convert the chapter 7 after the sale date, however, in no way will a conversion hurt you.

WALLSTREETESQ :

If the sale did go through the first mortgage would sell the property and be paid first, the second lender would only be paid if the first is 100% satisfied.

WALLSTREETESQ :

What you need to do is advise the sheriff, that you filed bankruptcy and they should have delayed the stay regardless of any future conversion.

WALLSTREETESQ :

As long as the lender does not file a motion to lift the automatic stay, the creditor cannot sell the property in a foreclosure.

Customer:

thanks for your quick response. I'm only going to be forced to convert if the judge will not allow me to treat an old judgment as outside of the bankruptcy. Perhaps you could provide some advice as to this. The second mortgage holder has been trying to foreclose since 2007 but they are basing some of their documents on documents which were falsified by Castle point mortgage when the loan was originated. Castlepoint was shut down for fraud and they had sold this mortgage into a GMAC pool as a first mortgage when it was a second mortgage. They claim to have a document which stated satisfaction of the first mortgage but they never filed it and they won't produce an original. In superior court they have stated conflicting positions but the last position that they confirmed was as second position to the chancery court judge who issued the writ of execution.

Customer:

I am in good shape with the first mortgage, the second has no equity.

WALLSTREETESQ :

If you are in good shape with the first,

WALLSTREETESQ :

and are contesting the second, you should force the second mortgage holder to prove their lien rights in an adverserial proceeding,

WALLSTREETESQ :

also, under a chapter 13, if the second is 100% underwater, you can lien strip the second as well.

Customer:

Can I motion the judge in chapter 13 to allow this unenforceable judgment to not be considered in the chaper 13 plan so that I have time to vacate it. This judgement has not been acted on in over 2 years after I won in appellate court where it was reversed and remanded back to superior court. The statute of limitations would prevent them from refiling.

WALLSTREETESQ :

Even if the first was not listed in a foreclosure, the first would be paid first regardless.

WALLSTREETESQ :

Yes, you can have it listed in the chapter 13,

Customer:

Yes, if I can get the chapter 13 judge to recognize the judgment that is still open on the computer system but is unenforceable. Would I submit a motion with the plan to do this? How would it be worded

WALLSTREETESQ :

However, the lender will still need to file a proof of claim to be paid.

WALLSTREETESQ :

I would file an amendment to the schedules and list the debt as a unsecured debt, and amend your chapter 13 plan to reflect the debt.

Customer:

Okay, thanks.... but the easiest way is to have it stripped if I can stay in chapter 13. The second mortgage holder has motioned to have me dismissed from the chapter 13 because of the outstanding judgment. This judgment is unenforceable so the question is how to present this to the court. My chapter 13 plan is due in a couple days. so I'm trying to figure out how to handle this

WALLSTREETESQ :

If it is unenforceable it would not be a secured lien

WALLSTREETESQ :

Did you list the second in the petition at the start?

Customer:

The judgment is for over a million dollars and would put me over the limit. Additionally the original judgment is under a statute which is not able to liquidated in bankruptcy.

WALLSTREETESQ :

So you did not list it at all?

Customer:

I haven't submitted the schedules yet.

WALLSTREETESQ :

It would be considered unsecured debt if it is not enforeceable,

WALLSTREETESQ :

so it would have to be listed, if it takes you above the limit, a chapter 7 would have to be filed,

WALLSTREETESQ :

and you should reaffrim the first mortgage and discharge the second in a chapter 7.

Customer:

I can't not list it but the second mortgage has motioned to have me dismissed because I would be over the 360k limit for chapter 13. Can the judge exercise discretion and give me time to get this vacated in superior court?

Customer:

I can reaffirm the first in 7 and discharge second and keep the property?

WALLSTREETESQ :

yes,

Customer:

property value is 600k, first mortgage is 625, second is 347k, no equity

WALLSTREETESQ :

if the second cannot force a sale, that can be done,

WALLSTREETESQ :

it is also 100% underwater, so it would not be paid in a forcelosure,

Customer:

the second is scheduled for sheriffs sale on thursday and I'm trying to block them.

WALLSTREETESQ :

the bankruptcy filling would stop them

WALLSTREETESQ :

If the try to foreclose, they would not be paid anyway,

WALLSTREETESQ :

the first would be paid, so I do not see how they benefit, if the debt is discharged from you, they would not be able to obtain anything from you as well.

Customer:

I filed bankruptcy as a 13 to block the sale the end of January and they immediately started filing to have me dismised. The next court date is the 7th. My plan is due the 6th.

Customer:

I was not aware that under a 7 plan I could keep the house and discharge the second mortgage, I thought that I could only do that in a 13 or 11

Customer:

If the try to foreclose, they would not be paid anyway

Customer:

They did not list the 1st mortgage at the sheriff's sale

Customer:

they say that the only outstanding lien on the property is theirs

WALLSTREETESQ :

The current Chapter 13 debt limits are $1,081,400 for secured debt, and $360,475 for unsecured debt. These limits were last adjusted April 1, 2010, and are adjusted every three years. The amounts are adjusted every three years to reflect the change in the Consumer Price Index for All Urban Consumers, published by the Department of Labor. The next scheduled adjustment will be in April 1, 2013. Bankruptcy Code §109(e) prohibits the use of Chapter 13 by individuals who exceed the specified debt limits. This means if you have secured debt obligations like mortgages or car loans that all together exceed $1,081,400, or unsecured debt obligations like credit cards, lawsuits, unsecured loans, or leases, that exceed $360,475, then you will not be able to take advantage of Chapter 13 Bankruptcy because you will not qualify

WALLSTREETESQ :

The sheriff would run a title report and see the first lien and pay them.

Customer:

The botXXXXX XXXXXne is that I can work with first mortgage and keep the house but if it sold, I'm out in the street and won't get another mortgage for a long time. So my best option is to keep the house.

WALLSTREETESQ :

Another option is to list the second as a secured debt,

WALLSTREETESQ :

the limits for secured debts is higher

WALLSTREETESQ :

yes,

WALLSTREETESQ :

The best thing to do is try to lien strip the second, in a chapter 13,

Customer:

how would that benefit me in the long run under the plan?

WALLSTREETESQ :

or discharge the second in a chapter 7,

WALLSTREETESQ :

the second lien, would be removed.

Customer:

that's the plan but for the fact of this unenforceable judgment sitting open that needs to be vacated

WALLSTREETESQ :

and you would only pay the first mortgage, and your unsecured debts.

Customer:

I don't really have any other debts

WALLSTREETESQ :

Then you are not over the chapter 13 limits,

WALLSTREETESQ :

You list the first as secured,

WALLSTREETESQ :

and the second as unsecured,

Customer:

how would you present the situation to the judge about the open judgment that is open but unenforceable?

Customer:

That's the only problem that I have with the 13 filing but that definitely puts me over the limit

WALLSTREETESQ :

how does it put you over the limit?

WALLSTREETESQ :

Did you add other unsecured debts?

WALLSTREETESQ :

The open judgment would be considered unsecured,

WALLSTREETESQ :

it would have to be listed as unsecured debt

WALLSTREETESQ :

If that puts you over the limit, you will have to file a chapter 7.

Customer:

because the judgment is for over 4 million dollars. It was reversed and remanded back to superior court when I took it to appeals court and the court found that the evidence was insufficient and that the plaintiff had not even met the burden of a prima fascia case. That was in october of 2010 and the plaintiff never took the case forward after that so based on non prosecution their time as expired. Also to refile, the statute of limitations would have expired. But if I list this debt that needs to be vacated asap, I'm over the limit.

WALLSTREETESQ :

Unless the judgment itself was vacated it would be a debt,

WALLSTREETESQ :

you can argue in a chapter 13 motion, that the judgment is not valid, and claim it should not be listed as per the Civil Court,

WALLSTREETESQ :

that may be a way to extend the chapter 13 proceedings as well.

Customer:

Can i motion that the court give me a few weeks to motion before the superior court to have this vacated?

WALLSTREETESQ :

yes,

WALLSTREETESQ :

a chapter 13 can be delayed for several reasons,

Customer:

okay, that's what I am trying to figure out. I ask them as a motion? Is there any case law that I can cite that will show the judge that this has been done before?

WALLSTREETESQ :

I would not have the case law, however I would consider retaining a local attorney to draft the motion

Customer:

thanks a million... this is a question I've been trying to figure out for several weeks.

Customer:

I've contacted 3 attorney's and all three have declined the case.

Customer:

I have no problem going in pro se but I'm not comfortable writing a motion

WALLSTREETESQ :

You can file the motion without the case law,

WALLSTREETESQ :

and argue the case by showing the decision made in the civil court, and attach the pleadings fromt he civil case to your motion

Customer:

would you also file a motion to vacate the judgment prior to the hearing on Thursday if possible?

Customer:

and include this with the motion?

WALLSTREETESQ :

Yes, and you can ask the Bankruptcy court to stay the chapter 13 until a decision is made in civil court.

Customer:

perfect........

WALLSTREETESQ :

good luck, and if you have any further questions please do not hesitate to ask.

WALLSTREETESQ :

If satisfied with our service please provide us with positive feedback.

Customer:

I will and thanks again, great job!

WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 15874
Experience: 14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
WALLSTREETESQ and other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

Hi again,


 


We had a conversation earlier about stripping a junior lien on a home in chapter 7 bankruptcy, reaffirming the first mortgage and keeping the property.


 


I've talked to 3 new Jersey attorneys and all of them tell me that this can't be done.


 


Is this a new rule because I'm just not sure how to proceed.


 

Expert:  WALLSTREETESQ replied 1 year ago.
you can strip the lien in a chapter 13 not chapter 7,

What I was stating is in a chapter 7, you reaffirm the first mortgage and discharge the second,

Customer: replied 1 year ago.

what is the difference between a discharge and a strip when it comes to the second position mortgage..... I'm missing something. I see a case called McNeal vs. GMAC from the 11 circuit. Is this the basis of what you are saying? As I said, I've spoken to a number of attorney's today and not one said that I can get rid of a second mortgage and reaffirm the first and keep the house so either they're not current, or I misunderstood what you were saying earlier. Thanks in advance if you could clarify.

Expert:  WALLSTREETESQ replied 1 year ago.

http://www.foreclosurefish.com/blog/index.php?id=565

Look at the article, what I am suggesting is not a lien strip, it is discharging the second mortgage in a chapter 7, what that would do is discharge any personal liability you have on the loan, and they can only foreclose on you, but if they do the first would be paid and they would receive nothing.

In most cases the second will not bother with a foreclosure as they do not receive anything.

Typically on first mortgages if you discharge the first, you can live in the home, by paying the monthly payments.

In a second that is under water, you can also pay the monthly amount, or in your case if you do not pay the monthly amount, they can either foreclose, or settle with you for some small amount. They cannot foreclose, without the first being paid, or being notified.

 

In a chapter 13, you can lien strip the second, and they cannot foreclose on you as their secured interest is gone.

Customer: replied 1 year ago.

they have already forclosed from second position. The writ of execution expired and they filed for an extension without notifying either me or the first mortgage. We are trying to stop them by filing bankruptcy and they have filed to have it dismissed because of the open judgment for 4plus million dollars so that's why we want to convert to the chapter 7. If it is discharged then how am I protected by an automatic stay? The court has held that the second mortgage can foreclose and then the first mortgage will have to sue for compensation but the end result is that I'm in the street.


I do not have a problem with the first mortgage and they will work with me to reaffirm but the second is going to do whatever they can do to get rid of me. So again, does 7 make sense if the 13 is thrown out?

Expert:  WALLSTREETESQ replied 1 year ago.

If your chapter 13 is dismissed, a conversion to a chapter 7 will keep the automatic stay in terms of discharging the second, you can do that in a chapter 7 and would benefit you in that you will not be personally liable for the debt, I do not see how title can be closed without the first being paid in full, I have never heard of making the first sue for compensation, the second cannot clear title without a satisfication fromt he first.

If that is not the case, I would drag out the chapter 13 for as long as possible and try to have the 4 million judgment removed or vacted so you can lien strip the loan. To drag out the case, file motions with the Court and ask for formal hearings on these issue.

WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 15874
Experience: 14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
WALLSTREETESQ and other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

bankruptcy court can hear the issue about the judgment or do i need to motion for time to go back to superior court to vacate the judgment.

Expert:  WALLSTREETESQ replied 1 year ago.
It would be difficult for the bankruptcy court to do this, you should file a motion to ask for more time so you can have the judgment vacated, that would be best.
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 15874
Experience: 14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
WALLSTREETESQ and other Bankruptcy Law Specialists are ready to help you

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