Does CH13 Wipe Out 2nd Mtg?
Talked to a seller today; home is in foreclosure (Mtg1=350K and Mtg2=53K). They plan to file Ch13 bec the attorney told them that Mtg2 (53K) will get wiped out. Is that true? They have no other debt and are filing Ch13 so Mtg2 is wiped; then the home would be worth what they owe on Mtg1
[ Edited by SKrei on Date 02/08/2011 ]
Since Chapter 13 is a repayment plan, I doubt it wipes out anything. I think they need to go Chapter 7 to actually wipe something out.
Since I am not an attorney, this is only a guess so check with a BK attorney for sure.
Here is a link to the Federal Courts which might give you more info.
http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspx
• Chapter 7. Liquidation Under the Bankruptcy Code
• Chapter 9. Municipality Bankruptcy
• Chapter 11. Reorganization Under the Bankruptcy Code
• Chapter 12. Family Farmer Bankruptcy or Family Fisherman Bankruptcy
• Chapter 13. Individual Debt Adjustment
John (LV)
Got this response from a local BK atr:
If they can show with clear and convincing evidence that the house is worth less than $350,000.00, and they file a complete and successful Chapter 13, it is possible.
However, technically, they need to file a separate lawsuit with the bankruptcy called an adversary proceeding, and these are expensive.
Technically no. However, the first position lien holder can motion the bankruptcy court to have everyone abandon their claims against the property. E.g. if the first is owed $200,000 and the property is worth $150,000, the first lien holder can motion the court (and all parties) to abandon their claims. The first then takes it through foreclosure and the second, third, etc. lien holders are all wiped off (unless they decide to pay $200,000 for a $150,000 property which is unlikely). To save time and money (which is the same) it may be practical to offer the 2nd lien holder a small amount to not fight it and walk away .
Just filing Ch 13 bankruptcy does not automatically extinguish any debt.
Ch 13 is a repayment plan. It is possible that the bankruptcy trustee could negotiate a discounted payoff for the second mortgage. Once the repayment plan pays off the discounted second mortgage, the bankruptcy trustee should get a release of lien from the lender.
If this seller is in foreclosure, a bankruptcy filing may only delay the foreclosure process. The first position lien holder could petition the bankruptcy court to release the stay on the property and allow the property to proceed to foreclosure. If the first position lienholder forecloses, the second mortgage lien will get extinguished but the debt does not go away..
The second mortgage lien holder can still petition the court for a deficiency judgment.
I have followed scores of these HOA foreclosure purchases, from the buy forward.
Many do not get paid for, the purchaser loses his/her 5% deposit and does not complete the purchase. I guess someone clued the purchaser in that their Deed will be subject to all previous encumbrances.
Another group use the court system to protest the sale...the usual defense being that "I am a novice purchaser. I made a mistake." Lately the Court has been postponing a decision, allowing the purchaser to negotiate with the Plaintiff and drop the protest.
The usual outcome is that the purchaser is let off the hook for the HOA lien amount, the sale is overturned and the surplus funds are returned to the purchaser. One guy paid $ 81K for a $ 6K lien, and got back almost $ 75K.
A search for "A Clear Title" can be rather misleading when the HOA foreclosing attorney includes the 1st and 2nd mortgage holders as defendents. Novices, and some experienced investors, analyze title and assume the mortgage companies are being foreclosed out. Not so by Florida Statutes.
[addsig]
I know the OP is old but this is getting to be a very hot topic. The investor is making money buying HOA liens by renting the properties out while the first lien holder goes through the long FC process.
He might pay $5000 for an HOA foreclosure and rent the property out for $750 a month for the next 20 months until the mortgage foreclosure process completes. He pays no taxes or mortgage payments during that time, only HOA assessments usually. So he can return close to $15,000 from that $5000 investment over 2 years.
Scummy but it works.
Eric,
If what you say is true, it sounds like "legalized" rent skimming.
Collecting the rent and not making the mortgage payments.
John (LV)
You are completely right Eric it is like that only and one will find problem further if they will not make payments which are necessary and worth required.
As a buyer in Charlotte N.C. that bought a condo 4 weeks ago from HOA sale for $3,800 that had NO LIEN.
If your smart and keep track i have seen banks foreclosure but ignore the hoa pending foreclosure.After the bank takes the house tru the foreclosure there is NO LIEN.A few weeks later we see the hoa sale and we buy it with no other bidders and there is a clear title because of the www.foreclosure.Most home owners do not believe they will loose there home to hoa www.sales.I buy them tru the www.sale.let the owners stay and pay the mortgage,taxes,insurance if there no currently behind.BUT I OWN IT FORM THE HOA www.SALE.There just happy to be able to www.stay.The hoa groups around here try to kick out the www.families.I hold for years and hope for value to increase,future development,etc.I will be doing one www.tomorrow.The hoa is $1,137.05 Value is $150,000 the loan is $140,000
There not behind on the loan.Just ignored the hoa.
Ontiverolaw:
tell us more about making money with tax deeds??
I think she is referring to tax liens, instead of tax deeds.
Quote:
On 2011-05-25 14:22, patty wrote:
Ontiverolaw:
tell us more about making money with tax deeds??
I am looking for getting all the updates about tax liens and tax deeds. Somewhere I am confused about this.
For Tax Liens, you might want to try this forum instead.
http://www.propbot.com/ViewForum16-7743.html
Quote:
On 2011-06-01 04:59, savana wrote:
I am looking for getting all the updates about tax liens and tax deeds. Somewhere I am confused about this.
Seems like you need a Hard Money Lender right?
How will the investor your looking for have security on the note?
Start with these:
http://www.propbot.com/modules.php?name=LenderFinder&op=findlender&state=TN&all=1
Thanks Joel!
No Problem. Glad I could help.
I looking for Good property for rel estate investment in Montana. Is there is risk associated with it. Any one having knowledge about this area.
[ Edited by KritanyaLambert on Date 05/26/2012 ]
curtbixel,
You certainly are welcome,
Very glad to hear it worked out well for you.
John $Cash$ Locke
I would think the obvious things would be money and their credit rating. Nevertheless, I think one important aspect of this whole thing would be their pride and self image. If you can find some way to allow them to leave the whole deal feeling like they are smart, I imagine they would be more likely to get the deal done and even be willing to accept less in terms of money.