Q: Kept paying mortgage after filing ch 7, now there's ample equity in the home the second lien holder wants to foreclose.
I am current on the first mortgage but did not reaffirm. The institution holding the second wants to foreclose or negotiate their balance ($50,000). The home has around $60,000 in equity. Could the second holder foreclose ? What about the first. I have no contract, am I building equity for the lender ? Any advise would be appreciated.
A: Reaffirmation agreements with mortgage lenders are not done in California. So long as you are making payments to the first, they cannot foreclose. If you had an attorney for your bankruptcy case, the attorney should have advised you that the second retained its lien on your property through the bankruptcy; only your personal liability for the loan was discharged which did not result in elimination of the lien. Options at this point are to try to negotiate with the second for payments; or look into refinancing. Unfortunately, if there is in fact $60,000 in equity, that covers the second's lien which makes them totally secured by the house. Or, if your financial situation has improved, you could look into a chapter 13 option with a bankruptcy attorney.
Sally J. Elkington agrees with this answer
This is a problem few lawyers foresaw and did not warn their clients about.
You need to negotiate and give them between 5 to 10 k for them to LEAVE YOU ALONE. Unfortunately, you live in an area which is in high demand and where your worst nightmares may come through, after your house attains its new increased equity. Talk to your attorney that sent you bankrupt and ask him whether he struck the second loan from your prior Bk7. If he did not, ask him why not. Best of luck
A: You don't have to reaffirm home loans in California. You can always look to the possibility of a modification or settlement if you have the money. The 2nd could foreclose but it is unlikely. Generally 2nds in this position just want some money to go away. A chapter 13 is also available, that would allow you to keep your house and pay back the 2nd.
A: You haven't received some good advice that you should have received when you filed your Chapter 7. The second can foreclose and they do. I currently have 2 clients in the exact same scenario. You HAVE to work it out with them somehow and before they start foreclosure. Good luck... TED
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