Dr. Martin Seligman is a pioneer of Positive Psychology, a therapeutic approach that focuses on mental wellness, rather than mental illness; he's the shrink with the glass half-filled, if you will. In his 2002 book, Authentic Happiness, he cites studies on lawyers that show lawyering is one of the more miserable pursuits in life. Luckily, the frustrated attorneys were mainly the large-firm associates, non-autonomous drones sequestered in windowless rooms tied to puppet-strings of partners. That's not me, so I tossed the book aside and picked up some Turow. Or maybe it was Grisham, I can't recall. But it occurs to me there might be another reason why lawyers have come to replace dentists (those souls once limited to 2 tools: pliers and whiskey) as the unhappiest of the work-force campers: uncertainty.

Sure, uncertainty applies in any field: for physicians, new cures come to light, for engineers, new techniques are gleaned, for designers, orange becomes the new black. The point is that every worker struggles with progress: the lifelong learning curve. In law, however, change can throw you for a loop. You were rowing forward, 2 oars in hand. A conflicting opinion, like a wave washes one oar away; you end up circling, going nowhere, bemused.

A while back, I wrote about In Re Munoz, a local case here in San Diego that addressed the issue of debt limits. In Bankruptcy Land (after I first used that term, I found it in a colleague's blog--I don't know who got there first, but we can share) you'll inevitably come across the prime numbers 7 and 13. Their respective connotations in the real world (lucky 7, unlucky 13) frequently hold true in The Land. Chapter 7 (which eliminates debt with zero payment) is often superior to chapter 13 (which requires the debtor to make monthly payments on the debt--albeit pennies on the dollar, and the unpaid pennies of debt are canceled). But chapter 13 may be lucky after all. If you have a second mortgage (which is a lien or secured debt that is junior to your primary mortgage or "senior" lien) it may have "become" unsecured due to depreciation; meaning the balance on the primary mortgage is now higher than the home's value & there's no equity to secure Junior.

If that is the case, chapter 13 presents a nifty procedure whereby we "strip" (lest you think of salon waxing strips or what happens in seedy bars--and if you think the latter, shame on you--herein strip means remove) the second mortgage. We change its character from secured debt, which maintains a lien on your property that limits your (future) equity to unsecured debt that will be eliminated upon completion of the chapter 13. Thus, the junior lien will be disposed of pursuant to payment of pennies on the dollar. Sounds good, right? But not everyone can do a chapter 13.

Chapter 13 has debt limits. You simply can't do a chapter 13 if your secured debt (e.g. mortgages/car loans) exceeds $1,081,400 and/or your unsecured debt exceeds $360,475. You may find lower amounts cited elsewhere, but these are the correct amounts; the next inflation adjustment will happen April 2013. Those are fairly high amounts; you'd assume your unsecured debt, e.g. credit card and medical liabilities is far from the threshold. And most people don't have mortgages in excess of $1M, even if you add up all the junior liens and equity lines. But there's disagreement in defining secured and unsecured debt. What of the portion of your mortgages that have become unsecured pursuant to depreciation?

If you owe more on your first mortgage than your home is worth, then any junior liens will be counted as unsecured debt that may disqualify you from chapter 13. And if you're also ineligible for chapter 7 (e.g. if your income is too high), then you're out of luck: you fall between (I was tempted to use the old English version of between: betwixt. I like that word better, because it reminds me of the candy bar) the cracks of 7 and 13. Chapter 11 is an alternative, yet it's a costly one without a promising success record in the industry.

But what of the unsecured portion of the first mortgage? If you count that portion toward the unsecured debt limit, that might by itself push you between the cracks. If you count it as secured, then you might better qualify for a chapter 13, since the secured debt limit is over $1M. The local Bankruptcy Court has considered how we should count.

In In re Groh from May 2009, the Honorable Judge Bowie (the Chief Judge) ruled that the unsecured portion of the first mortgage is counted as unsecured debt. So, Larry Groh and his wife, Shulamit Hanover's chapter 13 was rejected. In In Re Munoz from January 2010, the Honorable Judge Meyers concluded that the unsecured part of the first mortgage should be counted as secured debt. This determination averted dismissal of Oscar and Diana Munoz's chapter 13.

So, it's settled, right? Pick up the fallen oar, steer straight? It's never quite settled. Munoz had not overruled Groh; it had "diverged" from the latter. Recently a chapter 13 trustee challenged Munoz. After all, there are 5 judges in the Southern District of California Bankruptcy Court; their opinions may differ. In the end, the latest challenge did not disturb the Munoz law. Yet, there can always be appeals to a higher court.

Life happens in the presence of uncertainty. But we don't circle. We pick up that fallen oar, open our peepers and row. Change and surprise may be in store. But we venture forth.