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Roger
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 27244
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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I just filed chpt 13 for the sole reason of stripping a 2nd

Customer Question

I just filed chpt 13 for the sole reason of stripping a 2nd that based upon home value is unsecured - the equity line is with US bank and my 1st told me that when they checked my credit (i was inquirying about doing a harpII refi which i found out you cant do while in BK) the loan was listed as charged off (my last payment to them was Feb '13 so its been 7 mo)

my question(s) are:

What can US Bank do; what will they probably do?

since the only reason for filing BK 13 is to strip this loan in which over 5 yrs i will be paying approx $20K - $30K in trustee's pmnts (and maybe more if I get raises and add'l bonus - my job is good and stable), is it better, and/or possible (and if so how likely) to try and do a buyout/settlement similar to what they would get selling the debt, which I've read can be anywhere from $.05 - $.40 on the dollar

Thanks for your time and knowlwdge
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Roger replied 1 year ago.

Kirk Adams : Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for requesting me - - I'll be glad to assist.
Customer:

Hi - I'm not sure if i need to reply yet as I'm assuming you are looking at my info and questions but I guess it doesn't hurt - sorry I've never used anything like this

Kirk Adams : If US Bank's loan is the second mortgage, then it can be stripped away if there's no equity in the house to cover the debt. The stripped lien will receive the same treatment as your other unsecured debts (such as credit cards) in your bankruptcy.
Kirk Adams : These debts usually receive nothing or a small amount and get discharged (wiped out) at the completion of your Chapter 13 bankruptcy. After discharge, your lender for the stripped lien will be required to remove its lien from your house.
Kirk Adams : Thus, US Bank can't do anything other than try to claim that there's equity in your property adequate to cover all or part of the balance due. Other than that, you're entitled to have the lien stripped away.
Customer:

yes I am aware of what will happen if i continue with the BK but if the lender would normally sell the bad loan wouldn't it make more sense to try and buy it out or hire a firm to buy it for me similar to what the factoring firms do

Kirk Adams : Here's a good link about the process: http://www.nolo.com/legal-encyclopedia/rid-second-mortgage-chapter-13-bankruptcy.html
Kirk Adams : JUST BECAUSE the loan has been charged off doesn't mean that the lender can't collect
Kirk Adams : The second lender has the right to foreclose, and often will - - even if the first lien will take all of the proceeds from the sale.
Customer:

thanks for the link - understand the bank can still try and collect but when they determine that they are unsecured wouldn't they be more apt to sell it off or negotiate a discounted buyout

Kirk Adams : It is certainly possible to settle with the lender if it believes that you will file bankruptcy and have the lien stripped.
Kirk Adams : That is a "Card" you can play to try and settle. However, so many loans are guaranteed by federal funding, etc., the lenders are getting insurance payments to cover the default notes and really don't care.
Kirk Adams : It suits them to let the loan go and collect from the insurace company/surety instead of negotiating with you.
Customer:

OK so since they have just been notified about the 13 filing and my meeting with trustee is in two weeks, what is the best logistical approach - call them now; wait till after strip is approved

Customer:

what are my options for cancelling/withdrawing the chpt 13 filing - is there a certain point after which you can't

Kirk Adams : You don't have to have anything settled by the 341 creditor meeting.
Customer:

I'm basically trying to figure out if there is a "sweet spot" of time in this process to maybe get a deal done with the bank from threat of chpt 13 but still within a time frame that i could not have to complete it

Kirk Adams : You can generally dismiss a bankruptcy any time.
Kirk Adams : If you do so, any deals you've made are usually cancelled and things go back to as if you never filed.
Customer:

so how do i find out if my loan was insured and if insured is it legal for them to try and also collect from me

Kirk Adams : It's tough to dismiss a chapter 7 because of the affect it has on creditors and their collateral, but because a chapter 13 is a repayment of debts, it's generally easy to dismiss.
Customer:

if/when you dismiss a bk13, can you get off your credit or is there just like if you went the entire 5 yrs

Kirk Adams : You would just have to ask the lender if your loan was a government-insured loan (usually FHA loan).
Kirk Adams : They can't collect from you and from the insurance (if any exists) - - that would be receiving double - - which is illegal (called unjust enrichment).
Kirk Adams : Your credit is affected the same way when you file - - regardless of whether you complete your plan or not.
Kirk Adams : If you file bankruptcy and only stay in it 1 day, it's going to remain on your creidt for at least 7 years.
Customer:

when i ask my bk attorney if we can/should approach the lender he says not to do anything until it's stripped - kind of like don;t wake a sleeping giant - but should that matter

Kirk Adams : You can explain to creditors and/or ask the credit bureaus to place a note on your report that says you voluntarily dismissed your case, but it'll still appear.
Customer:

does the 7 years include the 5 yrs of being in the chpt 13 plan or is it 7 years after the 5yrs

Kirk Adams : I don't see that it should really matter becuase it's going to get stripped if there's no equity - - so it doesn't matter whether or not they know early or not.
Customer:

does the 7 yrs include the 5 yrs of being in chpt 13 or does the 7 yrs start after the end of the 5 yr chpt 13 plan is completed

Kirk Adams : Credit report should report bankrutpcy 7 years from filing date.
Customer:

so if the loan is insured are they required to remove the lien; and if so at that point would it make sense to dismiss the BK since they couldn't go after me

Customer:

how can i find out if the loan is insured - can i find out without contacting the lender - is there a way to look it up - would there be any reason they wouldn't collect on the insurance

Kirk Adams : Well, your problem then would be the federal government.
Kirk Adams : If the government guarantee pays the loan, then the government could sue you for the debt - - so, it's not going to work out that way.
Kirk Adams : There
Kirk Adams : There is no way that I know of to determine whether the loan is insured/guaranteed by the government other than asking the lender.
Kirk Adams : Thus, you'd still have to complete your bankruptcy to rid yourself of liability for this loan.
Kirk Adams : Your loan likely isn't a government loan UNLESS you recall it being an FHA loan; you have to fill out government forms, etc. to get the loan - - you'd likely know it.
Customer:

OK - have you had any experience where the fed gov goes after someone - is the only protection from the fed BK - I haven't heard of the gov going after people who defaulted on home loans like when they go in to foreclosure, etc...

Kirk Adams : Also, a government guaranteed SECOND LOAN is very rare. So, you probably should assume this isn't a government/insured loan.
Kirk Adams : Yes, I have seen the government sue - - this is done through HUD or the FHA.
Customer:

OK - then its probably not insured so then its a matter of trying to buy it out - but it seems like since we have already filed we will have this on our credit so i guess it makes sense to move forward for now and while in it I guess i or lawyer can contact them to see if they want to do a discounted buyout - if they know it's being stripped I'm assuming they couldn't wouldn't sell it to one of those co's since it has no value so maybe they would be willing to do a buyout - what do you think

Kirk Adams : The only way to strip the loan is to complete the bankruptcy; but if you can settle with the lender during the bankruptcy (either before or after the strip), then you could dismiss at that point and continue with the agreement with the lender.
Customer:

Kirk - you have been very helpful - thank you - if i want to speak to you in the future how do i get in contact with you

Kirk Adams : You are in the best position to cut a deal while the stripping is pending as the lender knows that if they don't settle, they'll get nothing.
Kirk Adams : THANKS for the kind words! If you need something further, please don't hesitate to ask.
Kirk Adams : Just start your question with the phrase "FOR KIRK ADAMS" and it will be directed to me.
Customer:

ooh - so what is the pending period - my trustee meeting is the 25th

Customer:

do you have a phone number or is that not OK

Kirk Adams : The pending period is any time until the bankrutcy court enters an order stripping the loan.
Customer:

so generally how long is that fro the time we have our meeting

Kirk Adams : No certain time - - - but usually months....
Kirk Adams : You've got plenty of time.
Customer:

OK - you have given me some helpful info with which to work with my attorney

Customer:

Thank you - I guess it's time to sign off - btw what part of the country are you in if you don;t mind me asking

Kirk Adams : Great! Thank you for allowing me to help.
Kirk Adams : Also, please take time to positively rate our conversation so I get credit for assisting you.
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 27244
Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
Roger and 2 other Bankruptcy Law Specialists are ready to help you

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Roger
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BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters