QUESTION
After chapter 7 discharge, & not paying the 2nd mortgage, what am I responsible to pay, to get rid of 2nd mortgage lien?
Asked on Dec 25th, 2012 on Bankruptcy - Colorado
More details to this question:
If I stop paying the home equity loan after my mortgages were discharged in my chapter 7, and continue to pay the first mortgage to keep the house, I'm pretty sure the 2nd mortgage will place a lien on my property. When I want to sell, my house 10 years from now, how much must I pay to the Home Equity loan people to get rid of the lien? Am I responsible for the amount not payed or the principle plus all the interest that I never payed for the last 10 years? (The loans were discharged so would I be responsible for all the interest too?)
11 ANSWERS
It is my understanding that if you did not reject your interest in the home in your Chapter 7, and you continue to stay in the home, then even though the debt was never reaffirmed on, the 2nd mortgage fully survives. So when the house is sold, the entire debt owing on the second mortgage is due and payable, including any interest (assuming the 2nd mortgage holder has not begun a foreclosure earlier).
Answered on Jan 04th, 2013 at 6:22 AM
Richard hirsh
The 2nd mortgage on your home is already a voluntary lien. Should you fail to pay, that bank can foreclose. That bank could not collect monetary damages since you were discharged. However, the terms of the mortgage will otherwise remain intact including accrual of interest. When you want to sell your home you will have to clear that mortgage lien by payment or short sale agreement.
Answered on Jan 04th, 2013 at 5:29 AM
Bankruptcy Attorney serving Plantation, FL
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Moffa & Breuer, PLLC
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If you had a first mortgage and a home equity loan (usually a mortgage in second place), unless there was a valid reaffirmation agreement with the banks or a denial of your discharge (for these or all debts), you were discharged from both loans and you personally do NOT owe any money. HOWEVER, neither the first mortgage nor the home equity loan lose their mortgages on the property and both of these lenders can continue to look to get paid from the proceeds of the sale of the property. Bankruptcy attorneys are waiting for the Eleventh Circuit Court of Appeals to rule on a pending appeal to see if your HELOC might be or was discharged in your Chapter 7 case. I'd contact your bankruptcy attorney and seek clarification.
Answered on Jan 04th, 2013 at 5:24 AM
Bankruptcy Attorney serving Madison, WI
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Richard B. Jacobson & Associates, LLC
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The second mortgage is already a lien on your property. Whether or not the holder of the second mortgage wants to foreclose is a question which it will decide based on the economics of the matter.
Answered on Jan 02nd, 2013 at 12:51 PM
Ethics & Professional Responsibility Attorney serving Palm Harbor, FL
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Stephen C. Whalen, P.A.
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Even though your personal liability on the first and second mortgages was discharged the mortgage liens are still valid. It may be that there is not enough equity in the home to make it feasible for the 2nd mortgage holder to foreclose.
Answered on Jan 02nd, 2013 at 12:50 PM
Insurance Attorney serving Redlands, CA
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Orrock, Popka, Tucker & Dolen
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Whether you pay or not, the Equity lender already has a lien on your property. The amount to be paid to remove it is negotiable. Of course, you are not personally responsible to pay anything because your obligation was discharged. When property is transferred in these conditions, the realtors for both sides and the lender and title insurance company will not let the property transfer until the lien is satisfied.
Answered on Jan 02nd, 2013 at 12:49 PM
Your 2nd mortgage already is a lien. That is what a 2nd mortgage is, just as a 1st mortgage is a lien. You may be able to settle the payment of the 2nd mortage for a small lump sum, but timing & the value of your property will be crucial. As a matter of law, the 2nd mortgage company will be entitled to receive the principal balance, and all accrued interest upon any sale of the property, no matter how long it takes.
Answered on Jan 02nd, 2013 at 12:49 PM
Bankruptcy Attorney serving Phoenix, AZ
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Law Office of D. L. Drain, P.A.
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You misunderstand the mortgages and bankruptcy. If you had a bankruptcy attorney please call them for advice. If you did not have an attorney now you can see the value of having someone skilled in this area of law. As far as secured debts - they are secured against the collateral, in your case the house. If you do not pay the debts then either one of the mortgages can foreclose. Just because you received a discharge does not mean you can keep items that have secured liens. If just means the debts that were discharged cannot sue you unless you sign a new contract, sometimes called a reaffirmation agreement. Even if the second lender never forecloses they still have a lien. If you sell the house that lien will need to be paid unless the lender will agree otherwise. I hope this helps.
Answered on Dec 31st, 2012 at 2:54 PM
Tax Problem Resolution Attorney serving Lake Oswego, OR
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THE WUHRMAN LAW FIRM
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Chapter 7 results in a discharge of your PERSONAL indebtedness on that home equity loan, but the loan remains a LIEN ON THE PROPERTY. Ultimately, when you try to sell or refinance the property, that home equity lender is going to want to be paid what they're due. However, if the property is not worth enough to cover that, they may agree to take less in a short sale. Also, many 2nd mortgage holders are cutting deals right now - taking pennies on the dollar to release their junior mortgages from people who have already been through Chapter 7.
Answered on Dec 31st, 2012 at 2:53 PM
Chapter 13 Bankruptcy Attorney serving Winston-Salem, NC
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Love and Dillenbeck Law
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The 2nd mortgage already has a lien on the home. As a mortgage, they should have filed a deed of trust with the county register of deeds. The only way to get rid of their lien is to pay them off or not pay for 10 years and hope they don't foreclose in the meantime. Your options are to keep paying or negotiate a lump sum settlement.
Answered on Dec 31st, 2012 at 2:35 PM
Daniel James Wilson
You have it mostly right. Both mortgage balances were discharged in your Ch. 7. But both lenders retain a lien on your land. It is usually the case that the house is worth less than the 1st mortgage loan balance, so the 2nd mortgage is completely unsecured. The 2nd mortgage holder has not foreclosed because they would get nothing. When you want to sell or refinance you will have to deal with the 2nd, but the 2nd will probably settle for a lot less than what you owe. Get some cash together and start dickering. To be completely clear, the 2nd mortgage lender already has a lien on your house.
Answered on Dec 31st, 2012 at 1:59 PM