CLIENT is 53. She has two sons who are just entering college. She divorced ten years ago. Ex-husband does not pay spousal or child support but left her with the community property residence. The house has a small equity. Not much. In plain language, ex-husband, left her with two kids to raise all by herself, without giving her any spousal support or child support to help his family, left her with a mortgage to pay all by herself on a house with no equity. Dumped her with what really is his responsibility as head of the household, left her alone with their two children, and just started a new life on his own as if he was never married and had no responsibilities. Client struggled through the last 10 years by herself and raised two sons without a father. Then, the company she worked for downsized and she lost her $75K a year job. Unemployment benefits are hardly enough to make ends meet.
So, client fell behind on house payments. It’s been nine months since she last made a mortgage payment. Her mortgage arrears are about $20K. She applied for a loan modification 6 months ago but was denied because she had no income. Two months ago, our God, the one true God, the God of Moses and Israel, El Elohim, whose beloved son, Jesus Christ died for our sins, because they both love us so, heard her prayers and blessed her with a job that paid $80K a year commensurate with her qualifications. With the new job, she resumed her mortgage payment last month but the bank refused to accept payment because of the large arrears. Banks may still accept payment if you are only one or two months behind; Perhaps, even a max of 3 months. But 9 months? No way Jose!
Client then proceeds to ask for a loan modification, which is granted with conditions. It’s the normal trial period of 3 months at the reduced mortgage payment that is $600 lower. Once the trial period is completed with timely payments, the conditions must be met. What are these conditions that client must meet? She has to remove all junior liens on her property. The IRS has a lien for $54K. The EDD has a lien for $10K. The HOA has a judgment lien for $17K. Firstly, an IRS cannot be removed even with a motion to avoid lien because IRS liens are not subject to lien cancellation. The only way to remove an IRS lien is to pay it in full, or make a deal with the IRS that allows client to remove the lien just so she can comply with the condition of her loan modification; fat chance of that happening. You know the IRS will garnish your social security for unpaid taxes, so why in this world will the IRS release client’s lien when she now makes $80K annually? This is like asking Donald Trump to be sensitive to minorities and disabled people. It’s not happening in anyone’s lifetime. Secondly, after the IRS there are two more liens for $27K. Where is client going to get $81K to pay off her three junior liens to comply with the loan modification conditions?
Therefore, the loan modification conditions are outright RIDICULOUS. Client cannot meet these conditions even at her current pay of $80K a year.
Client chooses the only feasible option left. She seeks Chapter 13 relief and will file a motion for court permission to finalize the loan modification in her Chapter 13. This case will allow her to object to the IRS claim of $54K and trim it down to size. She says that she only owes the IRS $25K because she already paid half of the claim by wage garnishment over the years. With an objection to claim, the judge can rule on how much she really owes to the IRS. She says she only owes the EDD $4K, also, because of previous wage garnishments. Further she says that the HOA only accepted a minimum of $1,000 a month to pay the $17K HOA judgment. In the Chapter 13, she can pay the $17K HOA judgment lien at $284 a month over 60 months. That’s a big relief.
Despite the temporary loan modification with ridiculous conditions, the enemy is still banging on client’s door. Bank has set the foreclosure sale of her residence for December! Chapter 13 will stop the foreclosure on its track, allow her to pay the arrears of $20K at $350 a month, pay off the IRS, the EDD and the HOA over 60 months, and with God’s help, allow client to finalize the loan modification in the Chapter 13. After 5 years, her two sons will be done with college and gainfully employed; then they can both help out their mom who raised them against all odds.
If the bank sees that all the liens are being paid in full in the Chapter 13 plan, that’s a good faith effort to remove all the liens. So, the bank may continue to finalize her loan modification.
“I have set the Lord always before me. Because He is at my right hand, i will not be shaken.” — Psalm 16:8.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave, Mailstop 58, Building A-1 Suite 1125, Alhambra, CA 91803.