Cramdown in Chapter 13!!

see Bradsher Cramdown in Chapter 13

This case is an example of why forensic audits need to go much further than they currently do. Brad Keiser’s Workshop on forensic analysis will focus on the important issues that are usually missed in TILA or other reviews.

As the case points out, the usual rule is that lien stripping and cram-down on residential loans in a Chapter 13 are not possible. BUT in this case they did exactly that. The astute lawyer read the documents. It turns out that the “security instrument” (mortgage or deed of trust, depending upon where you are) secured not only the payment of the note but also the payment of taxes, insurance and other things. Thus, the court reasoned that the debt COULD be bifurcated into secured and unsecured.

The debt was originally $65k, but it was reduced to $22k as against the property because that is all the property was worth. The rest was unsecured, subject to normal Chapter 13 plan and treatment. Thus the debtor/petitioner got to keep their home, make the payments on the new secured loan balance and treat the rest as unsecured debt.

Most mortgages seem to have similar provisions. Forensic analysts should look carefully at the wording, since a lawyer or expert evaluating the case would need to know if the mortgage is subject to cram-down in this fashion.

Tags: brad keiser, Chapter 13, cram down, creditor, DEBTOR, escrow, forensic analysis, lien-stripping, secured, unsecured
Posted in bubble, Corruption, Eviction, securities fraud |