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How to settle my 2nd mortgage?

• Im in a Ch13 BK right now which has become all but useless. I originally filed to save my house and repay the arrearages on my first and second mortgages which were fairly significant. In addition to that, I had some other priority debt like tax debt and legal judgements so I was in pretty deep over my head. Compared to most folks, my unsecured debt was pretty light- auto lease, less than $10k in credit cards, few other obligations. I filed in Sept 2010 so Im just about a year and a half into the plan paying $775 a month to the Trustee. At this point, almost all of my priority debt is either treated or paid. The judgements have been paid, and Bank of America offered me a mod on my first mortgage, leaving the tax debt. The IRS decided to get creative and pursued my wife for our owed debt becuase we filed jointly, and I didnt add her as a party to my Ch13 petition. Whether that was bad legal advice or my failure to read the fine print, you decide. I had to enter a payment agreement with them to keep them from levying my wife's wages and Im still paying out to them through my trustee. I need to verify where I stand in my status of case but Im fairly confident that all of my priority debt has now been paid with the exception of the IRS. I dont see the point of paying them twice each month if all that's left in my Ch13 is unsecured debt. I'd rather switch to a 7, keep my $775, and pay the IRS a little quicker. Im expecting a refund this year and that will obviously go towards paying my IRS debt which Im showing to be around $3900. The balance which doesnt get paid by my refund I can redirect the $775 I was paying the trustee and wipe it out fairly quickly. That way I can get my discharge and save the $20,000 or so dollars I'd be paying out over the next 2 years to the Trustee. If that weren't incentive enough, my wife and I are trying to adopt so if we were to continue with the 13 we'd be forfeiting any future refund we'd get with the Adoption Tax Credit while under the plan. The only hitch is my second mortgage. My attorney filed a lien strip motion to have it treated as unsecure debt but that's contingent on completing my plan and receiving a Ch13 discharge. At this point I dont see paying out 20 grand in addition to what could be a sizeable future refund based on the Adoption Tax Credits on a what was a $43k mortgage note. B of A sold the second to Realtime Resolutions who have told me that they can either modify the principal amount and collect payments or I can settle at about 15 cents on the dollar. While I'd love to write a check and make them go away, I dont have the cash and their contention is that they wont make payment arrangements on a reduced principal amount. I dont want to go back to being a slave to this 2nd mortgage (when Im still underwater on the 1st) but the Ch13 plan seems like chasing good money after bad at this point. Anyone who has ever adopted knows how hard it is and Ive come too far to put it on the shelf now. My question is, whats the smartest way to negotaite a settlement on the second? Ive heard of people just ignoring the second for an extended period but Im not willing to take a chance on another judgement or garnishement. Will a company like RTR reduce the principal amount? Just looking for some insight here before I completely commit to rolling my Ch13 to a Ch7.

• Answer:

  It is my understanding that you can not just "jump" from the 13 to the seven with out the trustees okay. You are probably assuming too much at this point. But the trustee should be willing to tell you exactly what has been paid off, and what is still left to pay off. I am pretty sure you need to go to court again to change your new thought arrangements, and think you may be turned down. As for the second mortgage, in my case, a chapter 11, they disappeared because they forgot to lien the house. But are they or are they not in a secured position? The first mortgage is in first position, and at the moment I'd just worry about them. IF, the 2nd is unsecured, may be you file a new chapter 11 on them. But if they are secured, then negotiate and see if they will take 30%. If not, let then stand in line behind the rest of the debtors.