[CLBS] Reopening an old chapter 13 that was converted to Chapter 7 in order to do a lien strip (or filing new case)

[Holly Roark]

I don't know whether this is even possible, but I figured I'd ask. This
proposition requires a LOT of undoing various things already done, so bear
with me. 

 

This case was filed as a chapter 13 in 2008, converted to a chapter 7 in
2010, and discharged as a chapter 7. The Debtors recently discovered that
their secured line of credit (second lien) on the house of course remained a
lien against the house after the chapter 7 discharge. They claim the
attorney converted the case without advising them of the consequences of the
conversion with respect to the junior lien. Moreover, they claim that the
attorney should have filed a lien strip motion in the Chapter 13 but did
not, and in addition, did not advise them properly on valuing their home.
They claim that their home value at the time of filing was well below what
was owed on the 1st, leaving no equity for the 2nd and thus proper to strip,
however, of course, their schedules don't reflect that. Debtors contend that
the value on Schedule A was wrong because they thought that "value" meant
"add up the liens."

 

They basically want to unwind this whole thing and go back to the beginning
and file an amended schedule A, set aside their chapter 7 discharge, file a
lien strip motion, and finish out the original 13 so they could get what
they had thought they were getting back then. Today, the house value is to
high to strip the second in a new Chapter 13. 

 

It might be easier to just sue the attorney for malpractice for the amount
of the lien and pay it off.

 

Since they discharged their personal liability on the 2nd, would it be
possible to strip the lien now in a new chapter 13, based on the value of
the property when the debtors received the chapter 7 discharge in 2010?
Someone who worked in banking was telling me that he seemed to remember
seeing matters like that cross his desk where in the subsequent 13 they
would value the home as of the Chapter 7 discharge for purposes of stripping
the lien.  

 

I'm curious to hear your thoughts on what might be possible with these
facts.

 

Best regards,

HOLLY ROARK


Attorney at Law 

Certified Bankruptcy Specialist -

By the State Bar of California Board of Legal Specialization

 

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