Whether or not the debtor is already behind in the payments to their 2nd TD before filing a “Chapter 13,” they must have their 2nd TD holder in their “repayment plan” if they are not currently giving up the property in foreclosure. I’m not a BK specialist so not sure if Chapter 13 debtors can “reaffirm” any debt (debt secured by real property incl) in a Chapter 13 filing. In Ch 13, I believe NO debt is discharged and just the terms of the debts modified (if the lender agrees). I DO know a debtor can (and may later be forced to if they cannot adhere to their “payment plan”) turn their Chapter 13 filing into a Chapter 7 (we used to refer to these debtors as “Chapter 20’s,” lol).
A “Chapter 13” filing, in and of itself (or even a Chapter 7 filing) is NOT going to protect ANY debtor from foreclosure in the long term. This oft-used tactic is basically just a blip on the radar screen, designed to buy the debtor more time to “squat.”
It is up to the affected beneficiaries to exercise their timely right to non-judicial foreclosure in CA and follow through with it, if the trustor is not making their payments. If there is any $$ from a trustee’s sale that is left over after the foreclosing (sr) lienholder is paid, the jr lienholder (if applic) receives the balance (if their representative is on the steps at the time of sale, bids the opening bid amt and there are no other bidders). If a jr lienholder forecloses because the sr lienholder is being paid timely and they aren’t, they are free to foreclose and take the property back on the steps, taking the sr lienholder debt “subject to” after the “sale” date. This has been the process throughout history (Chapter 7 or 13 filing be damned). There are ways around BK and the institutional lenders have long ago figured all this out and have attorney(s) at the ready.
The only reason to effectively “lien strip” as Rus is referring to here, would be to buy more time to “squat” (1-4 mos if the affected lender is on the ball). Obviously, victims of “successful lien-stripping” should have never loaned the $$ in the first place if there was not enough collateral present to protect them :=0
A “home-debtor” who plans in advance to go thru all this just to squat and live off the proceeds of their 2nd TD will most certainly fvck up their credit beyond recognition for at least 10 years, IMO. I’ve seen this before and all I have to say now is, “more power to them!”
