Bankruptcy debtors hear something different when their lawyer asks, “What do you owe on your mortgage”. It’s as though they speak a different language, Client, while we speak Bankruptcy. As bankruptcy lawyers, we need to be bilingual.
It shouldn’t be a trick question, but all too often the answer a bankruptcy lawyer gets back is the principal balance. Gone, somehow, are the arrears and corporate advances much less all the junk fees the homeowner knows nothing about.
It is the payoff balance that you want for the bankruptcy schedules: principal, interest, and everything else owed to the lender to obtain release of the lien. Knowing the arrears is important for the means test and for the plan, in Chapter 13.
But it’s also vital when you are considering a lien strip in Chapter 13. You may need every dollar owed to the senior lender to push the junior lien over the edge of the equity.
So, once again, don’t take the client’s input at face value. Probe to find out if the number you’re given for the mortgage debt includes any arrearages. Develop your linguistic skills in Client-speak.
Image courtesy of Wikipedia and Stuart Halliday.