Posted by John T (WI) on August 28, 2008 at 09:28:54:
A chapter 7 means you lose everything. A lot of people don’t want to lose their “stuff”.
Chapter 13 is a 5 year repayment plan. In most cases, they affirm their secured debt (houses, cars) if they want to keep them, but they have to keep paying them. Unsecured debts like CC’s will usually not get anything, or very little.
A chapter 13 is on your credit report for 7 years, and a chapter 7 for 10 years, IIRC. I’m really not sure about this part…it could be both for 10 years.
MH note cramdown by CH 13 Court - Posted by John Merchant
Posted by John Merchant on August 28, 2008 at 02:29:42:
All Lonnie Deal doers, beware of new bankruptcy decision that could bite you:
8th Circuit Federal Appellate Court has just ruled that a MH in a MHP, or on leased land, is NOT protected in BK CH 13 filing, from “cramdown” in value and its value can be reduced by the BK court to “actual” value.
In Tony Coleman vs. Greentree, an appeal by Greentree from the BK Court decision in 373 BR 907, in a MO case, that Fed. Appeals Court ruled that the Greentree debt could legally be, and was thereby reduced (crammed down)from actual current balance of GT note.
So if & when you sell an old tin can for a price that’s hugely over actual market value of the MH, to shaky buyers, just understand that their note to you just might be subject to BK Court “Cramdown” if they were to go file CH 13 and they were to ask the court for such a “cramdown”.
Their lawyer would make that request of the court and he/she’d be derelict in his professional responsibiilty to his client if he did not so request.
The 8th Circuit ruled that a MH w/o land, was just like any other personalty (personal not real property)and was therefore not protected by BAPCPA from being crammed down.
Futhermore, from the decisions cited in Coleman, it looks to me like this is the trend nationally so it could be coming to a BK Court near you.
Re: MH note cramdown by CH 13 Court - Posted by osupsycho (OK)
Posted by osupsycho (OK) on August 28, 2008 at 15:39:22:
So my question in this is how is “actual” value going to be determined. NADA, dealer prices (good luck finding them on old homes), crystal ball???
I don’t really see this as much of an issue as when I sell a home I do an NADA printout of it with all the contents and feathures, then finance the home for this amount. Funny thing is that almost everytime it is higher than I was thinking of as a sales price. NADA with all the add ons really inflates a homes value.
Re: MH note cramdown by CH 13 Court - Posted by JeffB (MI)
Posted by JeffB (MI) on August 28, 2008 at 06:37:39:
John,
Thanks for the info. I’m not particularly worried, personally, because I sell cheaper homes ($10k or less usually) and most of my buyers have filed bankruptcy a few years prior to buying one of my homes.
Although I am not an advocate of bankruptcy, I still do not understand why an individual would file a Ch13 instead of a Ch7. The Ch7 gets you over and done and on the path to credit restoration whereas the Ch13 can drag on for years, per my understanding.
Value determined by BK Court - Posted by John Merchant
Posted by John Merchant on August 29, 2008 at 10:03:47:
Yeah, I can see it now:
You, as note holder, get the Notice that the Trustee has filed his Motion to Reduce (cramdown) your note, based on his allegation that the MH isn’t worth nearly what the note balance is.
You show up for the hearing and the trustee calls you to the witness stand as an “adverse witness”, meaning he has the right to cross-examine you.
His questions go like this:
“Mr. Psycho, what did you pay for that MH?”
“How much did you pay to clean it and rehab it before selling to Ms. Bankrupt?”
“What is the total money you spent on everything before selling it?”
Your lawyer might object to these questions as irrelevant, but the BK Judge might overrule and then be somewhat swayed by your answers and feeling sorry for your poor buyer…and then order your note balance be chopped way down.
So while I sympathize and sure see your side, being there myself on some MH notes I’ve held and do hold, I just recommend you not get complacent or think it couldn’t happen to you.
Posted by John Merchant on August 28, 2008 at 11:01:11:
The BK court has authority to convert a Ch 7 to a Ch 13 if it feels there are assets belonging to the BK’s “estate” which might be liquidated and sold to pay creditors.
So even where BK files a Ch 7, just asking for liquidation of all debts and a complete discharge, these days that BK court is looking hard to see if there aren’t some liquidatable assets…and if it feels there are, then the Court converts the 7 to a 13.
Of course the asset normally found is the BK’s house in which the BK could have significant equity and is the BK’s only asset of any real value.