How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Roger Your Own Question

Roger
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 27246
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
6704987
Type Your Bankruptcy Law Question Here...
Roger is online now
A new question is answered every 9 seconds

Hi. I have a 1st and 2nd trust deed through the same lender

Customer Question

Hi. I have a 1st and 2nd trust deed through the same lender on my house in California. I have owned the house for 20 years and it does have equity over the amount of the loans.

The 2nd is due in a few months with a balloon of 200K which I will not be able to pay. I am self employed and have virtually no income and bad credit so a refinance is out of the question. I also have a high amount of debt other than the house notes.

Would a bankruptcy allow me to keep my house without paying off the 2nd?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Roger replied 1 year ago.
Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question.

If you want to keep your property, filing bankruptcy will not allow you to avoid having to pay the second mortgage. If you were to file Chapter 7, the second lender can foreclose and retake the property through a public sale - - which is especially likely if there's equity in the home.

Similarly, if you were to file Chapter 13, you could keep your house, but you would have to repay the debt through your plan. However, you could extend the repayment terms to make it possible for you to pay. If there was no equity in your home or if the loan to value ratios were negative, you would have the ability to try and cram down the balance to the current value of the home (after deducting the first mortgage balance). But, if the home has equity, you couldn't do that.

Thus, there's NO way to keep the home and avoid paying the loan off. The only thing a bankruptcy would do for you (chapter 13) is to extend the repayment terms, which should in turn reduce your monthly payment amounts.
Customer: replied 1 year ago.


I probably should have been more explicit in my question, but I was jumping the gun. My primary concern is being able to keep my house. Maybe the question should have been something along the lines of "What can I do to enable me to do that?"


 


I am willing to continue paying on both the 1st and 2nd to the best of my ability. Currently, I am current on the 1st and behind 30 days on the 2nd. I will be able to be mostly current on the payments, I just cannot come up with the 200K to pay off the 2nd when it's due.


 


Am I understanding you to say that a chapter 13 would FORCE the 2nd note holder to re-extend my due date to some future date? That would be a great outcome for me,especially if it could be a 5-10 year extension. I really don't want to not pay them, I just can't do it now.


 


Also, thanks so much for such a quick reply. Now that I've taken the time to sit and write out the question, my stomach has been in knots. :-)

Expert:  Roger replied 1 year ago.
Hi - thanks for the reply.

The ONLY thing that you can do to keep you home in this kind of situation is to file a chapter 13 bankruptcy and establish a repayment plan that will allow you to pay this debt back over time. The main thing you have to do is provide adequate protection to the lender - - which means to make sure that the value of collateral is not descending faster than you're paying the debt off. If you have a good deal of equity in your home, this should not be an issue.

The best thing you can do is to try and consult a local bankruptcy attorney in your area and try to get something filed before your loan matures.
Customer: replied 1 year ago.


Typically, how long would that take to get somthing filed? This loan comes due in May. Would it be possible for something to get filed that quickly?

Expert:  Roger replied 1 year ago.
On yeah, you've got plenty of time. You can get a bankruptcy petition filed in a few days
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 27246
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 1 year ago.


Thanks for the quick replies. I guess I'm off to try to set up an appt with a bankruptcy lawyer. Thank you again.

Customer: replied 1 year ago.

Hi Kirk,


 


I have some add'l questions. Would it be possible for you to bill my card and answer some additional regarding this same issue?

Expert:  Roger replied 1 year ago.

Hi - Thanks for looking me up again.

If your card is on file with your account, you can ask/rate me here and your account with reflect the fee.

I'm online for the rest of the afternoon, so just post when you have time. Thanks.

Customer: replied 1 year ago.


Hi. Thanks.


 


I am concerned about whether I'd be 'approved' for a chapter 13 bankruptcy. I did consult a bankruptcy attorney and left there feeling relieved. But after doing some digging on my own, now I'm concerned again. And even thinking of typing this out so it makes sense to you is kind of daunting.


 


I don't want to pay an attorney to file the bankruptcy only to be denied. Originally after consulting the atty, I thought I understood them to say that if the Chapter 13 wasn't approved, I wouldn't be charged their fees. I guess I misunderstood that. I would be charged their fees regardless.


 


The paralegal and attornies asked some questions about my home mortgage, utilities etc. They asked about AGI and unsecured debt also. They said they felt comfortable that I'd be ok with the bankruptcy.


 


 


What they didn't ask about was my business expenses. They said that if I was put into a bankruptcy repayment plan, my mortgage holder would be kind of forced to rewrite my mortgage. That sounds positive. In case you don't remember, I'm current but facing a big balloon I can't pay.


 


I own a retail store (doing dismally recently).


 


So, I own a home worth probably 500K and owe a total of 300K. I have a 401K of 100K after the early disbursements I have taken. I have about 80K in unsecured debt and no other secured bills.


 


I have a couple of kids living with me and they'll say they pay me whatever a month I ask them to say. Obviously it'd have to look reasonably in line with their income.


 


The business is a skate retail store (shoes/clothing etc) so the expenses vary. The fixed costs like rent, utilities and payroll are easy. The monthly outlay varies for purchases but I'm currently pretty much breaking even of losing a tad each month. (i just moved the store so I expect that to improve, but can't prove it)


 


Is there some way I can gain any certainty in whether it makes sense to move forward with paying an attorney? How can I know how much monthly income I'll need to be able to prove? And is it even provable with most of the income source being the retail store?


 

Expert:  Roger replied 1 year ago.

Hi - thanks for the question.

Basically, in order to be eligible for a chapter 13 bankruptcy and get a repayment plan approved, you must be able to prove that you have enough income/cash flow to pay all of your debts. Here's a good article that outlines this: http://bankruptcy.findlaw.com/chapter-13/who-can-file-for-chapter-13-bankruptcy.html

You REALLY won't know exactly where you stand until after you file your case and begin negotiating with your creditors about extending the terms of your payments, etc. in order to make them where you can pay. For example, if you're paying $2500/mo on your current 20 year mortgage and you want to add 10 years and drop the payment to $1900/mo, that can make a lot of difference with your disposable income and the money you have to pay other creditors. The same would go for your other creditors.

By extending the repayment terms, you make your monthly obligation less, which makes your money go farther. But, as I said, it's a little tough to guarantee you how this will play out until you file and begin negotiating with your creditors. However, the attorney you spoke to should be able to give you a fairly good idea about whether or not you could make a plan work based on your debts and income.

Unfortunately, there's no formula or way to specifically determine this prior to filing. Instead, you just have to give it a shot and try to make it work. The good news is that most creditors are willing to compromise because they know that if you can't file a chapter 13, you may end up filing a chapter 7, which means they're going to get pennies on the dollar - - instead of being paid in full with interest under a chapter 13.

Customer: replied 1 year ago.


Maybe I'm confused about a chapter 13. Doesn't the majority of the unsecured debt go away ? I believe the atty said I'd repay about 3%. If I have to repay that in addition to the montly expenditures in 5 years, there's no way I'll qualify for a 13.

Expert:  Roger replied 1 year ago.
Yes, your unsecured debt is generally discharged, and you would only be required to pay a percentage of that debt based on your disposable income AFTER making your plan payment. HOWEVER, unsecured debts are credit card debts, and other loans that don't have collateral securing them. But, a mortgage (secured by home), a car loan (secured by a vehicle) etc. are secured debts and you will have to pay them back in full.

BUT, you don't have to repay ALL of your debts in 5 years. Instead, the plan can only last a maximum of 5 year. You can have a payment plan for a mortgage that lasts 30 years, or a car payment that lasts 7 years. What happens is your plan will be completed after 5 years and you will receive a discharge - - but you will continue to pay your creditors DIRECTLY instead of through the bankruptcy trustee.
Customer: replied 1 year ago.


Kirk,


 


I am hearing two different things from two different attornies. I'm positive I didn't misunderstand either one of them, I've just got two different answers.


 


Again, I owe 100K on my 1st TD, and have a balloon of almost 200K on my 2nd due in May of this year.


 


The first attorney said because BK if a federal thing and the morgtage is federally controlled, the BK court would force the mortgage holder to refinance the mortgage, all 300K of it.


 


The 2nd attrney said the BK court would do nothing about the mortgage except stop the forclosure on the 2nd if the BK is approved BUT I would have to be able to pay the 200K in entirety over the next 5 years along with my other living expenses.


 


Can you address which of those two very different scenarios is correct?


 

Expert:  Roger replied 1 year ago.
Hi - I actually don't think either are entirely correct - you may not want another different opinion....... :)

If you file a chapter 13, the lender is entitled to adequate protection, which means that the lender can't be put in any worse position than it would if you were in a chapter 7 and liquidation were allowed. This basically means that the value of the property can't go down faster than you repay the debt back. Traditionally real estate was the safest type of property because values usually go up with time - - not down. However, these days, that's not always the case. Thus, if your house is upside down, it could be a problem UNLESS you're able to pay the lender enough to keep up with the depreciation. That said, the court should give you an opportunity to propose a repayment of the first and second mortgage through the plan - - then you'd just have to see whether the lender(s) object or not, and if it/they do, you'll have to try and reach a compromise. The repayment plan can only be overseen by the bankruptcy court/trustee for 5 years, but the payments can extend for several years past the plan - - especially when you're dealing with a mortgage. The courts regularly approve repayments on mortgages for 20, 30 or more years.

The court WILL NOT force the lender to refinance, but if you can prove that the lender is adequately protected, then the judge can approve the repayment plan.

I really disagree with the second attorney more because you wouldn't have to repay the entire $200k in 5 years as that would be impossible. As I said above, the court can approve a repayment plan that is much longer than the 5 year maximum for a bankruptcy plan.
Customer: replied 1 year ago.


OH MY GOOD GRACIOUS... another viewpoint. Now I'm not sure what to do or rather who to assume is correct.

 

I am not upside down, I have appx 200K in equity at todays values, certainly down from 2008, but relatively stable now.

 

So, question 1. If YOU are correct, can I assume that equity would be good enough to convince the court the lender wouldn't be in any worse position?

 

Question 2. If the lender wouldn't be in any worse position than a full chapter 7, would the court then "make" the lender refinance the mortgage without the balloon due now, but included in the refinance? I guess I'm asking if the lender would be forced to work with me or would they still be allowed to say no.

 

I'm going to leave this open for another day or two, but I'll be tipping big.

 

I can't tell you enough how much I appreciate having this sounding board of sorts to try to wrangle thru all this stuff I'm hearing and learning. Really, Thank You.

Expert:  Roger replied 1 year ago.
1. Yes, the equity in the home can provide adequate protection for the lender and give you the ability to claim to the court that repaying the debt over time will not harm the lenders.

2. IF there's adequate protection for the lender, then the court can approve a repayment plan that allows the repayment of the second lien as well as the first lien through the plan over a longer period of time. The second lender is likely going to object and claim that it should be entitled to its money now since the loan has matured. But, if there's enough equity to cover the loan and the loan isn't underwater, the court - - being a debtor's court - - is likely to give you more time to pay the debt off.

Please let me know if you have any additional questions.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
< Last | Next >
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
  • My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer. Eric Redwood City, CA
  • I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight. Michael Wichita, KS
  • PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent. Three H. Houston, TX
  • Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!! Elaine Atlanta, GA
  • It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem. Tony Apopka, FL
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
 
 
 

Meet The Experts:

 
 
 
  • FiveStarLaw

    Attorney

    Satisfied Customers:

    3203
    Bankruptcy Lawyer. Experienced.
< Last | Next >
  • http://ww2.justanswer.com/uploads/FL/FLAandNYLawyer/2012-1-27_14349_3Fotolia25855429M.64x64.jpg FiveStarLaw's Avatar

    FiveStarLaw

    Attorney

    Satisfied Customers:

    3203
    Bankruptcy Lawyer. Experienced.
  • http://ww2.justanswer.com/uploads/TL/tleeders/2012-6-13_204815_TSL1.64x64.jpg Terry L.'s Avatar

    Terry L.

    Attorney

    Satisfied Customers:

    2204
    Better Business Bur 15yrs bankruptcy experience. Chicago Bar
  • http://ww2.justanswer.com/uploads/mnphillips2/2009-03-13_203105_10984459-249293407.jpeg Phillips Esq.'s Avatar

    Phillips Esq.

    Attorney-at-Law

    Satisfied Customers:

    950
    B.A.; M.B.A.; J.D.
  • http://ww2.justanswer.com/uploads/CO/cortrightlaw/2011-12-5_4117_Kevin.64x64.JPG cortrightlaw's Avatar

    cortrightlaw

    Attorney

    Satisfied Customers:

    490
    Attorney practicing Bankruptcy Law including Chapter 7, Chapter 11, Chapter 12, and Chapter 13.
  • http://ww2.justanswer.com/uploads/Jay1968/2006-12-03_004423_JoeRossPhoto.jpg JoeLawyer's Avatar

    JoeLawyer

    Attorney

    Satisfied Customers:

    376
    Attorney in the practice of Bankruptcy Law since 1996
  • http://ww2.justanswer.com/uploads/DY/Dylatess/2012-9-11_1968_BHBTemplePhoto.64x64.jpg dylatess's Avatar

    dylatess

    Attorney

    Satisfied Customers:

    370
    35 plus years of experience specializing in bankruptcy law
  • http://ww2.justanswer.com/uploads/US/USLawAnswers/2012-9-20_23143_20090105211638Headshot3b.64x64.jpg Brent Blanchard's Avatar

    Brent Blanchard

    Bankruptcy Attorney

    Satisfied Customers:

    315
    Twelve years experience in all aspects of debtor & creditor BK.
 
 
 
Chat Now With A Bankruptcy Lawyer
Roger
Roger
Litigation Attorney
1798 Satisfied Customers
BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters