Bankruptcy debtors who are looking at Chapter 13 as a way to get rid of an unwanted second (or third) mortgage may have an additional obstacle to overcome if their case lands in Judge Melvin Hoffman’s courtroom.
In an opinion released in the Garrepy case (November 6, 2013), Judge Hoffman said that if the married debtors did intend to strip off the second mortgage as part of the bankruptcy, they could not also take the $147 monthly payment as a deduction on their Form 22C Chapter 13 means test. The result: add $147 to the debtor’s required monthly Chapter 13 payment.
(For a primer on stripping off loans, you can click here).
Judge Hoffman, sitting in Worcester, based his reasoning on an earlier case decided the same way by Judge Frank Bailey in the bankruptcy court’s Boston division. So while these opinions aren’t binding on the remaining bankruptcy judges in Massachusetts, their opinions are indicative of the general view of this issue in the Bay State.
Slick (or perhaps even sleazy) bankruptcy counsel might ask if it is worth it to announce up front in a voluntary petition whether the debtor intends to strip second mortgages or not. While all filings must be in good faith, a “change of mind” midway through the case is certainly common enough that it might offer a workaround if the proposed monthly increase in payments to the trustee is large enough
By Doug Beaton