October 13, 2008
Home Mortgage Stripdown in Chapter 13
In the 9th Circuit, a chapter 13 debtor is allowed to avoid the lien of a mortgage on his home if the mortgage is entirely "underwater" notwithstanding Section 1322(b)(2) which provides that the debtor may modify the rights of a secured creditor unless the collateral is the debtor's residence. These are called "Lam Motions." In re Lam, 211 B.R. 36 (9th Cir. B.A.P. 1997)(Bankruptcy debtors entitled to treat wholly unsecured deed of trust as unsecured lien); In re Zimmer, 313 F.3d 1220 (9th Cir. 2002)(approving Lam).
I happened to be looking at the calendar of a local judge yesterday and I noticed she had a number of these motions on calendar one particular day this week. Per her self-calendaring memo, she hears these motions only once a month. Of the 11 motions, her tentative was to grant 10 of them and continue one for better notice. The 10 motions avoided a total of $985,000 in liens. I'm no fan of banks, but I did not realize the enormity of the problem. The amount of the loans avoided ranged from $20,000 to $167,000. Two were Countrywide and two were Wilshire Credit and the others were scattered among other lenders but included B of A, Wells Fargo, WaMu, and GMAC.
The ruling in each case was to avoid the lien only if the chapter 13 plan was completed and a discharge was entered. The debtor however was permitted to treat the debt as unsecured and pay with the other unsecured creditors. One bit of good news on this, at least the debtors intend to try to keep their homes and pay the senior mortgages.
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Interesting information. It's good to have all the information possible.
Posted by: Home Mortgage | Oct 16, 2008 1:23:58 PM
if it is a below the mean debtor with no excess income is it possible to do a strpdown with no payments to unsecured creditors?
Posted by: peter g berman | Dec 11, 2008 12:36:33 PM
I have been so blessed that I have been working with the best mortgage brokers, that is why I did not experience any hassle on handling such things.
Posted by: mortgage brokers | Jan 4, 2011 7:23:28 PM