Page 6 - November-December-CBA-Report

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For example, let’s say that a house is worth $200,000, there is a first mort- gage for $190,000 and a second mortgage for $30,000. This means that the second mortgage attaches to $10,000 worth of equity in the home and $20,000 is unse- cured. In these circumstances, if the loan has matured (based upon the date of maturity on the promissory note) or if the loan will mature during the life of a Chapter 13 plan, the second mortgage can be repaid $10,000 as a secured claim and $20,000.00 as an unsecured claim. The second mortgage lien is then released from the property upon completion of the Chapter 13 bankruptcy.
Considering these circumstances, it is more important than ever for attor- neys to do their due diligence when they encounter a client with real estate. For example, in a divorce, the perceived equity in the property could be signifi- cantly reduced if the husband and wife forgot about the old mortgage. It is worth conducting a preliminary title search whenever property is involved to ensure that any possible debts associated with the property are uncovered.
If you or someone you know has received a letter or a pleading from an unfamiliar creditor asserting a claim against their real estate, don’t ignore it! I would be happy to talk with you about how this loan can be addressed and what possible defenses may exist against a fore- closure. At a minimum, the debt can be restructured and repaid over a five-year timespan in a Chapter 13 bankruptcy.
Zingarelli is an associate attorney with The Law Firm of Droder & Miller. He has been practicing law since 2005 in the areas of bankruptcy and general civil litigation. Zingarelli is licensed to practice in Ohio, Kentucky and Missouri. Reach him at nzingarelli@ drodermiller.com.
1 For more information on 80/20 loans, see https://www. businessinsider.com/personal-finance/80-20-loan.
2 In Chapter 13, general unsecured debts (like credit cards and medical bills) are paid back at a percentage of what is owed (sometimes as little as a penny on the dollar) with the unpaid balance discharged upon completion of the repayment plan.
3 There are exceptions to this rule. If the first mortgage holder does not file an answer to a second mortgage holder’s foreclosure complaint, the property can be sold at auction free and clear of the first mortgage holder’s lien.What happens when there are excess proceeds in this situation can be the subject of debate. See Villas at East Pointe Condo. Ass’n v. Strawser, 2019- Ohio-3554 (10th Dist. 2019).
4 https://www.zingarellilaw.com/blog/2022/07/08/protect- the-equity-in-your-home/
5 See In re Eubanks, 219 B.R. 468 (6th Cir. B.A.P. 1998).
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THE REPORT | November/December 2022 | CincyBar.org