Lien Stripping ?

[NotCranky]

Are lots of people doing it? I first heard about this yesterday.People file chapter 13 and get a second that is not backed up by any equity wiped out on the basis that is is technically and unsecured loan do to no collateral? Of course these people are spending more on non shelter items than lots of the rest of us all along. Even while filing BK.
Sour grapes.

[UCGal]

I assume the order is a little different than you describe…. they get the 2nd before they file BK… I’m pretty sure that debt obtained after you file is excluded from the BK.

I’m sure there are folks doing this but it seems easier to do it the old fahpshiond way – LOTS of credit cards.

[NotCranky]

The subjects and the verbs are separated too far in my OP, but if you read it again, you will see that my assumption is that the second exists before the BK.

[bearishgurl]

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!”

Lol …

[bearishgurl]

[quote=Jacarandoso]]…People file chapter 13 and get a second that is not backed up by any equity wiped out on the basis that is is technically and unsecured loan do to no collateral?..[/quote]

Rus, a note secured by a 2nd or succeeding TD is technically backed up by “collateral,” even if there is no value there to support it.

Chapter 13 filers file under this program specifically to go on a monthly “repayment plan” overseen by a third party for ALL their debts (secured or unsecured). I believe that non-adherence to their repayment plan will get their Chapter 13 dismissed, in short order. When Chapter 13 filers are threatened with dismissal and they still want BK “protection,” they have no choice but to file under Chapter 7.

[NotCranky]

Now,BG, I hope this guy didn’t get his hopes up for nothing! He was on fire about how BK was going to cramdown his debt on his house via “lien stripping”. I googled it, there are lawyers advertising that they can do it.

[bearishgurl]

[quote=Jacarandoso]Now,BG, I hope this guy didn’t get his hopes up for nothing! He was on fire about how BK was going to cramdown his debt on his house via “lien stripping”. I googled it, there are lawyers advertising that they can do it.[/quote]

Is the “law” sufficiently evolved such that this is possible now?? Lol, I must be asleep at the switch!!!!

I CAN tell you that persons who borrow on cc’s (unsecured) CANNOT discharge their cc debts in Chapter 7 unless it has been a full year since they used the card(s) in question!

Assuming arguendo that jr lienholders on real property can now be rendered “unsecured” (how can they do that??), the above (pesky) provision in the BK code kind of negates a debtor’s plan to take out a 2nd TD and not make payments (with the intent of future “cramdown” in a BK filing).

As we all know, it only takes 110-120 days to timely foreclose a TD in CA.

The “enterprising” debtor is going to run out of time if his lender is on the ball, dontcha think? Many of these “private” 2nd TD holders wouldn’t waste time in foreclosing (if there was any money in there at all for them)…

Wonder how much “up front” money these shysters want to begin a BK filing for their (douchebag) ad-answerers?

Is “debt-planning” a new “legal specialty” now (similar to “estate planning”)?

Am I missing something here?? SK, pablo, fat erik please chime in. Lolol….

[SD Realtor]

Heard the same advertisements on the radio Rus. I was wondering the same thing.

[SK in CV]

I guess it’s possible for a bankruptcy court to wipe out a 2nd that is far from having any equity. Can’t do it with a senior lien, so I can’t imagine what the upside is for the borrower. I suspect the only party that gains from this is the attorney. Borrower/debtor gets nothing more than a house that’s still underwater and ruined credit. Happy birthday.

[NotCranky]

SK, I think that compared to the mess the upside down person sees themselves in, and their overall prospects, it looks pretty good to dump a second.Maybe they are going to dump some other debt too?

By the way, as usual with these hard luck cases, the person who brought the whole thing to my attention has much more disposable income than I do,apparently.

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