Need Help- Trying to strip off 2nd mortgage in Ch 13

Not sure what to do. We have an 80/20 mortgage, 1st $173,500 and 2nd is $49000. Filing Chapter 13 due to loss of jobs and lesser pay. Want to keep home, but can't afford the 2nd mortgage which is interest only at 7.5% floating rate and typically $350/month. We were able to refinance our 1st to save around $400/month. Appraised home value is $174,000. We started out with attempting to strip off the 2nd mortgage but judge overruled that. Then we amended and put surrender collateral, which the 2nd mortgager didn't like. As much as we want to keep our house we absolutely refuse to pay the amount owed to the 2nd because that would keep us underwater in our house and basically there was no point in filing bankruptcy. We only have 1 car (owe $31000) and about $9000 in CC debt. Our lawyer is telling us to come back with a better offer to the 2nd but we don't want to or see why it's necessary. The 2nd mortgager just doesn't want to buy out the 1st in order to foreclose on the house. Not my problem. $500 is keeping us from getting the amount stripped off. We just need some advice on what to do. Should we give in to the 2nd mortgager, pay some of the amount and remain underwater or stick to our guns and keep it as surrender collateral?

Anyone who's dealt with this before please let us know what you did. We are at our wits end because they just won't give up or negotiate, which is what led us to surrender collateral. This has been going on since August. I can't handle any more anxiety attacks. Thank you.

If by "stripped off" you mean you expect the bankruptcy court to just wave a magic wand and make your 2nd mortgage debt disappear, I don't see it -- not over $350 a month when you decided to buy a car that's worth almost what the 2nd amounts to.  You have to keep in mind that you're not just talking about stiffing a given creditor, but your fellow taxpayers/consumers.  Bankruptcies are why everyone has to pay more and be stiffed more by the banks/shareholders/other people to make X profit.

If your attorney isn't explaining the obvious, then pester him until he does.  I'm not clear where people get the idea that it's a matter of you "want[ing] to" do X.  :) 

"We were able to refinance our 1st to save around $400/month."

One reason among many obvious ones why an argument that the second lender should be stiffed doesn't wash.  It sounds to me like someone needs to get a part-time job or two to deal with the extra $350 a month and stop wasting the court's time.

"Should we give in to the 2nd mortgager, pay some of the amount and remain underwater or stick to our guns and keep it as surrender collateral?"

You're not posing a legal question here but asking for a subjective opinion from a stranger that ought to be meaningless to you.  I'm not clear on people's insistence that it's some horrible thing to be "under water" because any investor should know that something may go up or down in value.  That's the risk you take, and if you plan not to stay in the house for however many years until value recovers, oops. 

"Anyone who's dealt with this before please let us know what you did."

That would be better put to a completely different forum (and one local to you/same court system).

confusedinMS:

Not my problem

Yeah, it's your problem.

You cheerfully borrowed the money and you're miffed because your lender doesn't want to let you out of it. Boo Hoo.

confusedinMS:

We only have 1 car (owe $31000)

Wow. Living a little high on the hog aren't you. That's gotta be a lot more than the $350 per month on the second mortgage. My figuring puts your car payment at close to $500 per month, more than enough to cover your second mortgage payment if you get rid of the car and use the difference to buy a cheap car.

confusedinMS:

they just won't give up or negotiate

Good for them.

confusedinMS:

I can't handle any more anxiety attacks

Then cancel your bankruptcy and suck it up like the rest of us. Or let your house go and rent.

Well, to clarify, getting a 2nd job isn't going to happen. My husband already works 70+ hours a week and I can only work 30/week, We have a child that I have to take care of. I could get a full time job but I'd make the same amount of money working 40 that I do working 30...plus I'd have to pay extra for child care. (It already takes 1 of my 2 week paychecks to pay for daycare) That just doesn't wash.

We only have 1 car, not 2 or 3 like some people who file. We purchased the car when I worked full time, making about $15000 more per year and my husband was making about $10000 more. That wasn't an issue and isn't claimed on my bankruptcy. When my job wouldn't let me return to full time work, that's the issue. That's the lack of extra cash to cover the mortgate amount.

It's not bad to be underwater in a home, especially if you want to stay. But when you are basically $50000 underwater...I'll NEVER be able to get that money out of my home EVER! I work for a real estate company. The market here isn't going up any time soon. In fact, when I wanted to list my home before we filed, my agent would only list it for $160,000. Therefore, I couldn't sell and WF wouldn't approve a short sale. I'm not wanting to stiff anyone, but if they aren't willing to work with me then I'm not working with them. This is just a house. My family is what makes it a home and I can make a home somewhere else. I purchased during the huge 80/20 boom in 2006 and have regretted it ever since.

The reason I wanted opinions was to just try to get some ideas of what else I could try. I'm tired of going round and round and nothing ever coming of it. Also, there isn't a forum for my location. I checked.

Your reply is appreciated but your smart tone was not. I'm just trying to do what's best for my family with what I have to use.

Your tone is not appreciated. Read my other reply. As a family we are making about $25000 less a year than last year.

I thought this forum was for help. I'm cancelling my account immediately. You have been no help and have actually made me feel worse than I already do.

The second mortgager does not have to foreclose and most will not in your situation. You say that is not your problem. They can make it "your problem" and they are making it "your problem: You do have to deal with it, like it or not.

Chapter 13 bankruputicies are repayment plans, even if the full amount of the debt is not paid. I don't know what to tell you. You want the convenience of a chapter 7, but you apparently do not qualify for a chapter 7 (probably a means test issue) or you would not be here asking this question. If you can't get the trustee or the judge to agree to your proposal, then I think that you have to listen to your attorney and come up with a different plan, if you want to stay in the house.

You could always give up the house, but that may not let you off the hook entirely if you do not qualify for chapter 7 relief.

the lender is entitled to get paid or at least jockey to the extent allowed by law to minimize the haircut it takes....and that includes to press for a solution you don.t like......

I hope OP has not been scared away. Her situation is common and, unfortunately, the bk court does not have a solution that will allow a reduction in the amount owed on the second. The strip off did not work because there is equity (even if only one penny) in the property after consideration of the first mortgage. The bk law does not allow one to modify the rights of a lender solely secured by the debtor's principal residence therefore, OP is stuck to the full amount of the second mortgage. Had there been no equity in the home after consideration for the first, OP would not be posting since she would have perfected the strip off.

Since there is equity to support the secured claim, OP cannot force the mortgage lender to settle for a lesser amount. OP can try but the lender simply can say "no".

If OP cannot afford the second mortgage or does not want to continue to "rent" the home from the lenders, OP can walk away. The home would be surrendered through the Plan. OP would continue to reside in the home (rent free but for the HOA payment if there is one) until the property was lost to a foreclosure. This option is done all the time and works quite well since it could take months and months and months for the first to foreclose.

Des.

despritfreya:

The home would be surrendered through the Plan. OP would continue to reside in the home (rent free but for the HOA payment if there is one) until the property was lost to a foreclosure. This option is done all the time and works quite well since it could take months and months and months for the first to foreclose.

A word of caution on that plan.  Before going that route the OP would be wise to determine exactly what the timing of foreclosures is in their state and have a plan with somewhere to go no matter what.  I don't know about MS but in Georgia lenders typically foreclose in as little as 30 days.  GA has one of the fastest foreclosure processes in the country.  If MS is similar the OP could find themselves on the street much quicker than they planned when it doesn't take months and months and months to do the foreclosure.

ClydesMom:

A word of caution on that plan.  Before going that route the OP would be wise to determine exactly what the timing of foreclosures is in their state and have a plan with somewhere to go no matter what.  I don't know about MS but in Georgia lenders typically foreclose in as little as 30 days.  GA has one of the fastest foreclosure processes in the country.  If MS is similar the OP could find themselves on the street much quicker than they planned when it doesn't take months and months and months to do the foreclosure.

Ah yes, very true but. . . if OP is current on the 1st and stops paying, it will take the first at least 3 months before it even thinks about filing a MLS. Once filed, another 14 plus days before the lender can submit the Order to the Judge.  Probably another 3 days before it is signed and 14 days thereafter before it is "final" (unless the 14 rule is waived).  And then . . . the lender will move the file from the bk department to the foreclosure department (another 30 days maybe) before it proceeds under state law. Like I said, months and months. But, you are correct, once ready to proceed under state law, such will depend on normal state procedures.

Des.