Sometimes you need reminding about what you know. I’ve been so involved in looking for Truth in Lending violations or other defenses to my clients’ awful mortgages that I forgot the line of attack that is dependent on market value not wrong doing.

Karen Oakes reminded me that a Chapter 13 debtor can avoid a mortgage where there is no equity to secure the debt. At least in the 9th Circuit, even a voluntary lien, such as a mortgage or deed of trust, is avoidable if senior liens equal or exceed the value of the property at the time the bankruptcy is filed.

Supposing that you avoid a junior mortgage, you are still left with the question of whether it makes sense to keep the house: making payments on a loan that equals or exceeds the value of the house is not obviously a smart use of money.

I think, on today’s news, we have to figure that it will be a long while before property values recover from the hit they have taken. More and more, I am advising clients that the best use of the property is to live in it without making payments for as many months as possible before the lender takes it back.