Legal Question in Bankruptcy in California

First, be very vigilant with your loan modification. If you hired someone to do it, you need to watch over their shoulders contstantly as there are far too many "scam" firms out there ripping people off. It is very sad to say that many attorneys have been caught up in this, and even some law firms offering loan modification services have turned out to be bogus. If you are doing it yourself, still be vigilant, but do it on your own behalf. Push like crazy for your modification, as the banks need a lot of pressure to get these done in any reasonable time frame.

Here is the good news. If you qualify for a loan modification on your first, and that loan modification is through the federal HAMP program, then when that becomes final, your second lender, if they also are participants in HAMP MUST give you a loan modification - what is called a 2MP loan modification. You need to first determine if both lenders are participants in HAMP, and that can be done on the makinghomeaffordable.org website.

If not, you cannot "strip" your second mortgage in a Chapter 7 bankruptcy. Some attorneys don't agree with that statement, but if you read the bankruptcy code carefully, it is very clear that a mortgage cannot be stripped on your primary residence in a Chapter 7 ever. In a Chapter 13 bankruptcy, you may be able to strip the mortgage if it is absolutely, unquestionably, wholly unsecured. By that I mean that an appraisal would prove that there is not sufficient value in the home to even cover the balance due on the first mortgage, making the second mortgage "wholly unsecured." This is not for the faint of heart, and in most jurisdictions requires an adversarial proceeding (a mini-lawsuit) within your bankruptcy to remove the lien. While it will require an attorney, and require a decent chunk of attorneys fees, compared to keeping the mortgage, it is going to be very worthwhile. As you are in Northern California, email me off this list and I can get you a referral to someone up there who is very conversant in lien stripping and loan modifications.

Finally, you can generally exempt a certain level of equity in your assets, though if you have equity in your home, then the second mortgage is not unsecured, and cannot be stripped. Again, you need to review the facts with a qualified, experienced bankruptcy attorney. Taxes are more complex than whether they are 3 years old, and again, that is something you should discuss with a qualified, experienced attorney. Do email me off this list and I will get you the name of someone very well qualified in your area. She is in the Bay Area, but well worth the distance to get someone who can really help you with these problems.

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