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  1. #1
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    Default Filing Chapter 13 Bankruptcy To Restructure House Debt, Prior Chapter 7 Discharge

    My question involves bankruptcy in the state of: california. in november 2009 i had a chapter7 discharge can i file a chapter 13 not for a discharge but to come up with a repayment plan of my payments that im behind on and save my house.

  2. #2
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    Default Re: 10 Days Away from Trustee Sale

    In general, the answer is "yes". Talk to a local attny but you better act now or forever hold your peace.

    Des.

  3. #3
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    Default Re: 10 Days Away from Trustee Sale

    Quote Quoting despritfreya
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    In general, the answer is "yes". Talk to a local attny but you better act now or forever hold your peace.

    Des.
    des,

    What if they did not reaffirm the mortgage loan? How would a chap 13 demand payments be set since there is actually no contracted debt but merely an allowance to pay off the lien on the house using the same payment method contracted under the mortgage loan?

  4. #4
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    Default Re: 10 Days Away from Trustee Sale

    Quote Quoting jk
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    What if they did not reaffirm the mortgage loan? How would a chap 13 demand payments be set since there is actually no contracted debt but merely an allowance to pay off the lien on the house using the same payment method contracted under the mortgage loan?
    A reaff is not required. Since the lien survives the lender still has a "claim" as defined by 11 USC 101(5):

    See Johnson v. Home State Bank, 501 U.S. 78 (1991)

    "After petitioner Johnson defaulted on promissory notes secured with a mortgage on his farm, respondent Home State Bank (Bank) began foreclosure proceedings in state court. While foreclosure proceedings were pending, Johnson filed for liquidation under Chapter 7 of the Bankruptcy Code, and the Bankruptcy Court discharged him from personal liability on the notes. However, because the Bank's right to proceed against him in rem survived the bankruptcy. . .the Bank reinitiated the foreclosure proceedings once the automatic stay protecting his estate was lifted. . . (But) before the foreclosure sale, Johnson filed for reorganization under Chapter 13, listing the mortgage as a claim against his estate. The Bankruptcy Court confirmed his plan to pay the Bank's judgment in installments, but the District Court reversed, ruling that the Code does not allow a debtor to include in a Chapter 13 plan a mortgage used to secure an obligation for which personal liability has been discharged in Chapter 7 proceedings. . . The Court of Appeals affirmed, reasoning that, since Johnson's personal liability had been discharged, the Bank no longer had a "claim" against Johnson subject to rescheduling under Chapter 13."

    HOLDING:

    "A mortgage lien securing an obligation for which a debtor's personal liability has been discharged in a Chapter 7 liquidation is a "claim" within the meaning of § 101(5) and is subject to inclusion in an approved Chapter 13 reorganization plan. Congress intended in § 101(5) to incorporate the broadest available definition of "claim,". . . A surviving mortgage interest corresponds to an "enforceable obligation" of the debtor. Even after the debtor's personal obligations have been extinguished, the creditor still retains a "right to payment" in the form of its right to the proceeds from the sale of the debtor's property. Alternatively, the creditor's surviving right to foreclose on the mortgage can be viewed as a "right to an equitable remedy" for the debtor's default on the underlying obligation. . ."

    Des

  5. #5
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    Default Re: 10 Days Away from Trustee Sale

    I realize that a reaffirm is not required but in not doing so, the debt is considered voided by the BK 7, correct?

    What I am saying is:

    if the debt was not reaffirmed, there is no binding contract concerning the debt. i.e.; there is no debt for the BK to consider in a chap 13 action.


    The lien obviously remains intact since the debt behind the lien has never been paid which is why the bank can take the property if the owner fails to pay the debt behind the lien even though it has been discharged through the chap 7 action. Due to that the lenders claim still remains intact (as you posted) but the loan and the loan agreement is no longer intact. Therefor, how can the BK action demand a repayment plan unless the lender is willing to agree.

    and if the lender does agree, doesn't this then negate the bk 7 action of voiding the debt and essentially make a new contract for the mortgage loan?

    tryin' to learn from ya Des.

  6. #6
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    Default Re: 10 Days Away from Trustee Sale

    Quote Quoting jk
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    I realize that a reaffirm is not required but in not doing so, the debt is considered voided by the BK 7, correct?
    No. The in personam liability is still owed. The ability to collect is enjoined. 11 USC 524(a)(2)


    Quote Quoting jk
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    If the debt was not reaffirmed, there is no binding contract concerning the debt. i.e.; there is no debt for the BK to consider in a chap 13 action. . . (and while the lien survives), how can the BK action demand a repayment plan unless the lender is willing to agree. . .
    Because 524 simply enjoins collection. The contract is still there. Since the lien survives the creditor has a "claim" that can be addressed in the context of a Chapter 20 (7 then 13). The Code speaks in terms of an "allowed claim". 1322 allows a debtor to cure any default so long as the holder of an "allowed secured claim" maintains its lien and the debtor maintains post petition payments on the “allowed claim". This was the crux of the USSC recognition of the validity of a Chapter 20. The definition of “claim” is very broad.

    The Chapter 20 does not create a "new debt". It is providing for payment of the surviving lien based upon the terms and conditions of a contract that the lender is enjoined from enforcing under non-bankruptcy law (other than exercising its in rem remedy).

    As a side note, forget the Chapter 20 for the moment. . . A lender is technically free to sue on a discharged debt since 542 is just an injunction. A debtor would have to either seek redress in bk court for violating the injunction or raise "discharge in bk" is an Affirmative Defense to the state court proceeding. If an Affirmative Defense is not timely raised, it can be deemed "waived" depending upon a particular state’s Rules of Civil Procedure.

    Hope this helps.

    Des.

  7. #7
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    Default Re: 10 Days Away from Trustee Sale

    Quote Quoting despritfreya
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    Hope this helps.

    Des.
    yes, it does. It also causes me to do some research about what you have presented as it goes against what I was understanding as the facts of the situation and need some more information to answer some additional questions your information has raised but it is a great start to that research.

    Thanks.

  8. #8
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    Default Re: 10 Days Away from Trustee Sale

    Pull up the USSC case. I started in this business in 1987. While Chapter 20's were used in my district before that 1991 decision the rumblings made by lenders (usually auto lenders who were subject to major cram down in those days) ended the moment Johnson came out.

    Des.

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