Tag: cram down

Using the Bankruptcy Cram Down to Save Investment Property

Posted on by Emil Fleysher

Many clients come into my office seeking assistance with modifying their investment property mortgages. The first question I usually get is “will the bank reduce my principal down to what the property is worth?”
The answer is that offering meaningful principal forgiveness is very rare in conventional “HAMP” or “Proprietary” modifications. Unfortunately, this results in investment properties becoming unaffordable and impossible to maintain. However, these clients often get speechless. This happens when I advise them that they can cram the mortgage loan amount down to the fair market value of the property in Ch. 13 Bankruptcy.

What is ˝Cramdown˝?

A “cramdown” in a Chapter 13 bankruptcy enables the borrower to reduce the principal balance of a mortgage loan down to the actual market value of that property. While this Chapter 13 cram down may be utilized to save a car, boat, or other property, the benefits are best realized in saving investment real property. The catch is that most courts require paying off the balance in the 5-year Ch. 13 payment plan. However, there may be exceptions and an attorney should be consulted to determine and explain your options.

For those borrowers in South Florida who may benefit from and are considering the cram down, the time is now for doing so. This is because property values in Broward & Palm Beach counties have been rebounding substantially in recent months. As the values go up, so does your potential balance under the Ch. 13 cram-down. Also, the bankruptcy case can be filed and initiated at any point; whether you are current on the mortgage or in foreclosure.

If you have questions about Foreclosure, Loan Modification, Bankruptcy, Short Sale, or other alternatives, please feel free to call my office at 888-886-0020. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Lien Stripping on TBE Property in Chapter 13

Posted on by Emil Fleysher

When deciding whether to file a Chapter 13 Bankruptcy together with your spouse, there is a new interesting factor to consider. In a recent case, the next thing happened. Judge Cristol denied a Chapter 13 Debtor the ability to strip a lien off of his home. Lien stripping is a great benefit of Chapter 13. It allows an underwater property owner to knock off a second mortgage, provided it does not have full security.

However, debtors will now have to take into account how their home is owned when considering lien stripping. In this case, the filing of Chapter 13 was individual or without the Debtor’s spouse. The entirety (TBE) of the Debtor and his wife owned the home as tenants. TBE means neither spouse owns the home individually, but each spouse owns the whole or entirety.

The Judge determined that individual debtors do not have permission to strip down or off a mortgage. That is unless the other spouse is also a joint debtor in the Chapter 13 case. Unfortunately, this is a burden of TBE ownership. When a property is owned TBE, any type of ownership change requires joint action by both spouses. On the upside, Chapter 13 allows a debtor to voluntarily dismiss their case at any time, unlike Chapter 7. So if you file Chapter 13 individually and you want to strip a lien, then you may voluntarily dismiss your case. And, you may refile with your spouse included.

If you have questions about foreclosure, loan modification, bankruptcy; or other alternatives, please feel free to call my office at 954-484-9987. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Stripping an Unsecured 2nd Mortgage in Chapter 7 Bankruptcy. Can it be?

Posted on by Emil Fleysher

Previously, lien stripping was something that could only be done in Chapter 13. However, a recent opinion from the 11th Circuit has changed that rule. Here, a Chapter 7 debtor in Georgia sought to strip off a second mortgage that was totally unsecured. The 11th Circuit reversed the Bankruptcy Court. And, they found that the lien could be stripped off pursuant to the plain language of the Bankruptcy Code.

It is an old belief that the Supreme Court’s decision in Dewsnup v. Timm precluded a Chapter 7 debtor from stripping off a lien. However, the Supreme Court only addressed stripping down in Chapter 7. Stripping down is the process of reducing a secured claim to the value of the property it secures. There is a very clear difference between the two.

While this is a Georgia case, 11th Circuit decisions are controlled in Florida; because Florida is part of the 11th Circuit. Accordingly, it will be interesting to see how bankruptcy judges in our district rule when they face this new case law.

If you have questions about foreclosure, loan modification, bankruptcy, or other alternatives, please feel free to call my office at 954-484-9987, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.