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Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
Experience:  Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
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I went under bankruptcy last summer primarily for being behind

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I went under bankruptcy last summer primarily for being behind on my mortgage. My vehicle and mortgage was put in the plan. I have a second on the mortgage that I thought was combined with the first in a prior modification. So, the second came and it was added onto the bankruptcy about six months after filing with arrearages. The townhouse I'm in used to be worth about 95000 (based on tax assessor value) but is now worth about 65000 based on comps. With all my payments and arrearages for both mortgages, I'm paying 1700 a month. It's too much for the house I have. I was going to keep it up because at bankruptcy filing last summer, the bank said I have only five years left on the house. Now they're saying I have 12 years left on the house because of a modification in the past (that I wasn't sure fully went through because I wasn't sent anything to sign). The deed on file at the bankruptcy court says the mortgage is dated 2003; which makes the five years left make sense because it was a fifteen year loan. Do you have any suggestions on what I should do in this is getting tight and that's alot to spend on a house worth 65000.

Fritz :

Hi, how can I help you this afternoon?


Fritz :

Did you combine the first and second mortgages prior to filing the bankruptcy?

Customer: replied 5 years ago.
Can you help me with the bankruptcy questions I have above?

Yes, but I need some additional information in order to help you with this, as the sequence of events is really important here:

1) First of all, do you have an attorney representing you in this bankruptcy?

2) Was the bankruptcy filed before or after the loan modification agreement that combined your first and second mortgages?

3) What was the principal balance on each mortgage (best estimate is fine) at the time you filed the bankruptcy? What was the property worth at the time you filed your bankruptcy?

4) Did you sign any paperwork agreeing to a loan modification with the lender?

Customer: replied 5 years ago.
Yes, I have an attorney representing me. The bankruptcy was filed after the modification; I thought the two mortgages were combined but the bank is now saying they weren't combined in the modification. The principle balance of the 1st was about 75,000 at the time of the bankruptcy filing. The second I thought had previously been combined with the 1st. But the bank says I owe 21,000 with 9500 in arrearage for the second. I initially took out about 17,000 for the second. At the time I filed last summer, I didn't check to see what the property was worth. I filed for a loan modification, but I was a little unsure of the outcome.

It's actually much better for you that the mortgages are NOT combined. Since the second mortgage is likely wholly unsecured (i.e. the second mortgage lender would get nothing whatsoever after the first mortgage is paid off in full), you may be able to "strip off" the unsecured second mortgage in your Chapter 13 case and treat the second mortgage ($21,000 with $9,500 in arrears) as a general unsecured creditor in your Plan.

To do this, your attorney would need to file 1) A Motion to Value and Determine Secured Status (this may be called something slightly different in your state, but it's the Motion that lets you strip off the second mortgage) and 2) Motion to Modify Chapter 13 Plan (proposing to treat the second mortgage as a general unsecured creditor).

The second mortgage lender WILL object to this treatment (as it would save you nearly $30,000), so you will need your attorney to handle this (at a very rough estimated cost of $500-$1000), but it's definitely worth trying.

There may some other issues here that I'm not aware of (which may be why your attorney hasn't done this for you already), so you should discuss this matter with your attorney and find out specifically why he didn't try to strip off the second mortgage earlier in your case. Good luck!

Customer: replied 5 years ago.
The attorneys office tells me they can't do anything about the second. Maybe I need to talk to another attorney. Can you tell if I really went through a modification? If the deed filed with the bankruptcy court just shows the 2003 dated file, would a modification show up being (if it was done) prior to the bankruptcy filing. What would I have proof of that I have a modification?

At this point, I'd really have to take a look at your particular case (I could technically access every filing in your case using PACER). Unfortunately, I don't believe I'm allowed to ask for your case number XXXXX JustAnswer's Terms of Service, as it would 1) disclose your identity and personal information to me and anyone else with PACER access coming across this page, and 2) potentially be considered specific legal advice, which I'm not allowed to provide.

However, I can say this: the existence and circumstances of the alleged mortgage modification agreement are important to your case (i.e. did you sign it, when did you sign it, what does it say, etc.). I'd check the recorder's office first, as a mortgage modification agreement should really be recorded (although it may not be). If you don't find anything there, take a look at the attachments to the Proof of Claim filed by the bank (search under "Claims Register" to view all of the Proofs of Claim filed in your case). If you still don't find anything, make sure you didn't "agree" to the modification AFTER your bankruptcy was filed (which may have been allowed so long as the bank filed a Motion for court approval, you had signed the modification at some point, and the bankruptcy judge signed off on it). Good luck!

Customer: replied 5 years ago.
I believe I made application, but there was never any additional agreement papers filed. I checked the deed of trust filed in the bankruptcy cour, and it has. Maturation date od 2018 with no mention od a modification agreement.

I hope I didn't confuse you earlier; your bankruptcy attorney is likely to be perfectly competent if he was able to get your Chapter 13 Plan confirmed (trust me, it's not easy!). I was thinking about ways to lower your monthly payments but didn't really address your questions and concerns as clearly as I should have. Here's a better explanation addressing the issues I believe you were actually asking about:

When you include the mortgage in your Chapter 13 Plan, the bankruptcy court has the power to judicially rewrite the terms of your mortgage contract. This means that the provisions in your confirmed Chapter 13 Plan override the contractual provisions in the mortgage.

I'm guessing that what the bank was trying to tell you last year (although it probably wasn't articulated very clearly) is that the first mortgage (only) would be paid off in five years if you continued making timely payments in the full contractual amount each month.

Now I'm guessing that the bank has subsequently combined the principal balances and arrears on the two mortgages and lowered your effective monthly payment. However, as a result of lowering your effective monthly mortgage payment, the loan was probably re-amortized so that it will now take 12 years to pay off.

Also keep in mind that the monthly payments you're sending to the bankruptcy trustee include not only your mortgage payments, but also your car payments, small dividends for your unsecured creditors (credit cards, personal loans, etc.), attorney's fees for your attorney, delinquent taxes (if applicable), and a trustee's fee of about 10%.

Thus, your mortgage will likely NOT mature in 2018 (unless the Plan provides for it to do so), and you probably don't need to worry about having to make a potential balloon payment or anything of that nature so long as you continue making your regular monthly mortgage payments after your Plan ends. You should really check with your attorney on this issue though, as your particular case could differ; I have, for instance, seen Plans that provide for a huge balloon payment in month 60.

If you decide that the mortgage payments are simply too expensive and you want to walk away from the home, you are allowed to do so while you're still in your Chapter 13 Plan, but the catch is that the bank would then be allowed to foreclose on your home while you're still in your Chapter 13 Plan as well. Again, you should speak with your bankruptcy attorney about this if you're considering it as an option, as there could be serious financial consequences if this isn't done correctly.

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