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Elizabeth Prentice
Elizabeth Prentice, Attorney
Category: Bankruptcy Law
Satisfied Customers: 174
Experience:  Managing Attorney for one of the largest consumer bankruptcy firms in America.
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This is a chapter 13 question. The plan has not yet been confirmed.

Resolved Question:

This is a chapter 13 question. The plan has not yet been confirmed. The Debtor is paying for the remainder of her home inside her plan that has both a 1st and 2nd mortgage. There are no strip off issues. She proposes to pay 4.25% on her 2nd mortgage. The contract rate is 9.25 and the 2nd mortgage creditor is objecting to confirmation on the grounds that they are entitled to the full contract rate amount. The prime interest rate is now 3.25% so the creditor proposes prime plus 1%. Is the creditor entitled to the contract rate or can the debtor contest this? If the debtor can contest this, what are the debtor's best grounds for doing so? Thank you in advance for your assistance.
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  Elizabeth Prentice replied 3 years ago.
I am a bankruptcy attorney and I would be happy to assist you. Unfortunately, since the 2nd mortgage is secured and can not be stripped or cram downed, she is stuck paying the contract rate if the mortgage lender holds the debtor to it. There is no law that will allow you to reduce the interest or allow you to contest it. However, if the creditor agrees to a lower interest rate, that is fine. You merely have to have the creditor amend their proof of claim with the court with the new agreed upon rate and then put in the new rate in the plan. The trustee will accept this. In conclusion, it will be the attorney's negotiating skills with the lender that lower the rate in the end. Another important thing to note is that the debtor can refinance the home in bankruptcy, with the trustee's approval. This may be the best option depending on the home's value and the amount of the secured debts on the property.

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