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CalAttorney2, Attorney
Category: Bankruptcy Law
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Experience:  Civil litigation attorney for individuals and businesses.
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I have a question about what Utah bankruptcy courts consider

Customer Question

I have a question about what Utah bankruptcy courts consider "unsecured" vs secured debt.

Some courts seem to rule that if my home is worth $ 100,000 but I have loans of $500,000 then I have $ 400,000 of unsecured debt and am NOT eligible for a Chapter 13 , but would have to file a Chapter 11. Others rule that because the initial loan was secured, the loan is still classified as secured for Chapter 13 qualifications. How does Utah bankruptcy court specifically rule in my example?

Here is a link concerning the situation:

I know in Utah if one dollar of the loan is secured the entire mortgage is secured. This is important for lien stripping a second mortgage. The second mortgage would have to be fully unsecured in order to be stripped.

The problem is the court seems to have a different opinion as to what "unsecured" means for the Chapter 13 qualifying vs. "unsecured" for the purposes of lien stripping.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  Wendy-Mod replied 4 years ago.

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Customer: replied 4 years ago.

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Expert:  CalAttorney2 replied 4 years ago.
Dear Customer,

I want to be clear in understanding your question, you say that your home is worth $100,000, and that you have loan(s) of $500,000, giving you $400,000 worth of unsecured debt. You have not provided enough information for me to give you any definitive answer on your exact situation, but I can give you some basic legal principles which should help.

If your home is worth $100,000 and you have a first mortgage of $500,000, you have $500,000 of secured debt. If you have no other debt, you only have secured debt. Your mortgage might be what is termed "undersecured" but legally it is still a secured loan.

If your home is worth $100,000 and you have a first mortgage of $80,000 and $420,000 of other unsecured debt, you only can claim the $80,000 as secured debt. The remainder is considered unsecured for purposes of determining whether or not you can file a Ch. 13.

I hope this helps please let me know if you have any questions or if I missed or misunderstood what you were asking.

Best regards,
Customer: replied 4 years ago.

You have correctly understood the question.

There is only a first mortgage. There is $400,000 of "undersecured" debt according to your analysis.


Let's assume there is no other unsecured debt--just an undersecured first mortgage. In that case the person would definitely qualify for a chapter 13 right?

Expert:  CalAttorney2 replied 4 years ago.
Dear Customer,

My apologies for not responding more quickly, there are several other factors that come into play with regards to whether or not a debtor can qualify for Chapter 13, but regarding the Chapter 13 debt distribution, you would fall under the debt limitations of unsecured debts of less than $360,475.00 and secured debts of less than $1,081,400.00.

Best regards,
Customer: replied 4 years ago.

Let's suppose there is $360,475 of unsecured debt in credit cards and $100,00 of "undersecured" debt from the first mortgage. No second mortgage and secured debts are under 1 million dollars.


I just want to make sure this debt distribution qualifies for a Chapter 13.

Expert:  CalAttorney2 replied 4 years ago.
Dear Customer,

Based purely on the amount of debt, this would qualify for a Chapter 13 plan. The other factors would need to be considered in the plan, but the debt considerations would be met.

In most instances, once the debt figures are met, the other factors are not an issue, unless there are some factors specific to the bankruptcy at issue which would require the retention of bankruptcy counsel, the estate will almost always qualify for a chapter 13. (I do generally recommend seeking a bankruptcy attorney for advice to get the most out of the bankruptcy, spending a little bit of money on a good bankruptcy attorney can save you a large amount in the plan itself).

Best regards,

(My apologies again for not responding more promptly, for some reason I am experiencing a technological problem with your particular post and I am not receiving notifications of your updated questions. I will check in more frequently on your post).

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