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Treatment of undersecured 2nd mortgage in 13
I have a higher income, CA resident, possible client who wants to surrender a home in Florida. There is equity to support the entire first mortgage and a portion of the second mortgage - but he figures it is about $120,000 under water. Florida is a recourse state. Can I do a 13 to surrender the Fl property while paying off 100% of his student loans and modest unsecured debt, or will the trustees in the Central District require the undersecured portion of the 2nd mortgage also be treated as unsecured debt (and paid accordingly) for purposes of plan confirmation? Assuming I can get the plan through without providing for payment of the undersecured portion of the 2nd mortgage, does anyone have a feeling for the odds that the 2nd will file an unsecured claim post-foreclosure? As an aside, I bring this issue up because, in my former state (NV) the Judges were starting to require that the debtors use a 506 type valuation on undersecured mortgages for purposes of plan confirmation (i.e. the undersecured portion has to be paid pro-rata along with general unsecured creditors) - whether or not a deficency had been established under state law and whether or not the creditor had filed a 506 motion! This obviously was causing problems in high income cases.
The post was migrated from Yahoo.