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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Bankruptcy lawyer Brent Blanchard was answering before. If

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Bankruptcy lawyer Brent Blanchard was answering before. If he is available, I could continue with him.
The information I have at this point is that a second lien against a property with mixed use (both rental and primary residence) could be stripped from the property in bankruptcy if it is the case that the MV of the home is less than what is owed on the first. Mr. Blanchard quoted several cases showing this in Oregon and California (9th circuit). My question is, does the outcome in bankruptcy depend solely upon the home value, or does my ability to pay play in? Would I get a repayment plan in 13, or could the second, if its proved that there is no equity to support it, be stripped regardless?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  Fran-mod replied 7 years ago.

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Expert:  cfortunato replied 7 years ago.

Hi pinched,

In a Chapter 13, the amount paid to an unsecured, second mortgage company depends on the plan payment, which depends on the debtor's disposable income. In short, stripping the lien does depend on your ability to pay.

I think this is what you wanted to know. If not, please let me know.

Thank you!

Customer: replied 7 years ago.
Suppose the judge in the 13 decides I can pay $XX per month on this second. How would the interest rate be determined? How would the term be determined? Those two things would tell whether this was worthwhile to file or not. What's the prevent me coming out with worse terms than I already have with the lender?
Expert:  cfortunato replied 7 years ago.

Your monthly plan payment is the total of your disposable income, which is the amount of one's income that is left over after deducting the debtor's allowable expenses.

This payment is distributed to creditors in the following manner: 1) Secured debts (first mortgages, car loans) are paid according to the loan terms, 2) the balance of the monthly plan payment is paid to rest of the debts according to the proportion for each remaining debt of the debt balance. In other words, if there are 3 debts totaling $100,000, and debt A is $10,000, debt B is $30,000, and debt C is $60,000, debt A would receive 10% of the balance of the monthly plan payment, debt B would receive 30%, and debt C would receive 60%. Unsecured debts do not accrue interest for the duration of the Chapter 13 Bankruptcy, and at the end of 3 - 5 years, all unsecured debt - including the second mortgage - is discharged, regardless of how much those creditors received in the plan.

In summary, if your total plan payment will be more than the payments to your second mortgage and other unsecured debt, filing a Chapter 13 would not be worth while.


cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and other Bankruptcy Law Specialists are ready to help you
Customer: replied 7 years ago.
My situation is, I have only two debts, the first and the second. The first is already modified and I have no interest in including it in the bankruptcy. I have no credit card debt or car loans. The second is $54,000, interest only at 3%. But it's adjustable, and a few years down the road I will be paying much more. Are you saying that if this second were included in a 3-5 year payment plan under the original terms, then at the end of those payments, the debt would be discharged?
Expert:  cfortunato replied 7 years ago.
Thank you for accepting my answer!
Is the second mortgage unsecured? If you are not sure, what is the market value of your home, and what is the balance on the first mortgage?
Customer: replied 7 years ago.
The home is worth 700K tops. The first is $700K, the second is 54K. There is no equity to cover the second. The first is modified to 3% (B of A). I tried to get the second modified (Chase). They've refused four times. I want to strip the second from both the property and myself. The property is mixed use, vacation rental 2/3, my primary residence 1/3. I can move out, making it no longer my primary residence if this helps satisfy the bankruptcy code on no cramdowns for primary residences. Can I get this loan stripped/crammed down? Can I pay on a ch 13 plan for 3-5 years and then get it removed? I have no other debts. I have very little disposable income. Thank you!
Expert:  cfortunato replied 7 years ago.
Then the answer is yes - the second mortgage would be discharged at the end of the 3-5 year duration of the Chapter 13.