SF New Start

Virtually every Chapter 13 we prepare contains a "lien-strip" these days.  The lien-strip is a very helpful tool for debtors whose homes have dropped in value and who have second or third mortgages or equity lines.

Example:  In 2000 homeowner buys a property worth $300,000 and has a first mortgage of $240,000.  In 2006 the property is worth $500,000 and homeowner obtains a $100,000 second mortgage.  Today the property is only worth $235,000 and the balance on the first mortgage is $238,000 and the balance on the second is $100,000.  The bankruptcy court may allow the homeowner to "strip-away" the second mortgage and render it an unsecured debt which can be reduced or completely eliminated in a Chapter 13 bankruptcy proceeding.

We were appalled by this article in the New York Times entitled "What the Costumes Reveal"  http://www.nytimes.com/2011/10/29/opinion/what-the-costumes-reveal.html?r=1

Recent Court of Appeals Case:  Aceves v. U.S, Bank, N.A.

Aceves obtained an adjustable rate loan from the bank to purchase real property secured by a deed of trust on her residence.  Later, when Aceves could not afford the monthly payments she filed Chapter 7 bankruptcy.  She intended to convert to a Chapter 13 enlisting financial assistance from her husband to reinstate the loan.  The bank promised to work with her on a loan reinstatement and modification if she would forgo further bankruptcy proceedings.  Accordingly, she did not convert her bankruptcy case to a Chapter 13 or oppose the bank's motion to lift the automatic stay.  Meanwhile, the bank, unbeknownst to Aceves, continued the foreclosure process and then completed the foreclosure.  The court found that the bank had promised to work with her to modify the loan in addition to reinstating it, and presented Aceves with a compelling reason to opt for negotiations with the bank instead of seeking bankruptcy relief.  The court said the Aceves relied on the bank's promise by declining to convert her bankruptcy to a chapter 13 and by not opposing the bank's motion to lift the stay.  The court held that Aceves may pursue promissory estoppel and fraud claims against the bank.