Laconia, NH asked in Bankruptcy for New Hampshire

Q: i am holding a second mortgage for a divorce settlement what happens if they file bankrupt to me and bank is first NH ST

i am in process of signing the final stip agreement this week someone told me i wouldnt get anything if they file bankrupt in the future is that true,?

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1 Lawyer Answer

Robert Gambrell

Answered
  • Bankruptcy Lawyer
  • Hernando, MS

A: Your question is not clear, but I think you are saying that a husband and wife have a 1st mortgage on their home and you hold the 2nd mortgage on that home. Now that same couple has filed for divorce, and you are worrying about collecting if they file for divorce. The other possibility in your question is that you are a spouse in the middle of a divorce and the other spouse will keep the home, but owes you money as part of the property settlement and the spouse that is keeping the home is being required to sign a mortgage giving you the second lien on the home.

With respect to the first scenario, if the divorcing couple both file a bankruptcy, then they will discharge the debt owed to you unless you can show some misrepresentation in obtaining the debt, some fraud or other nondischargeable actions on their part, which is doubtful that you can prove. However, the bankruptcy will not discharge your second lien. However, to protect the second lien, you will have to pay the first mortgage to keep that lender from foreclosing. You will need counsel to help you take the necessary actions to allow you to foreclose on your second mortgage to become the owner of the home again. If there is little or no equity above the 1st mortgage balance, then you will not have a lot of options.

With respect to the second scenario, if your ex-spouse decides to file a chapter 7 bankruptcy at some point, then he/she will not be able to discharge your the debt that is secured by the second mortgage. However, if he/she doesn't pay the first mortgage, you will be forced to pay the first mortgage to keep that lender from foreclosing. If there is little or no equity above the payoff of the first mortgage, then your only option to collect will be through the divorce court. If your ex decides to file a chapter 13, then the debt may be dischargeable. That will depend upon whether the debt is considered to be in the nature of child support or alimony. If not, the debt can be discharged in a chapter 13. You would have the same rights under your second mortgage as stated above.

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