Philadelphia, PA asked in Bankruptcy and Real Estate Law for Pennsylvania

Q: I filed chapter 7 four years ago and included my mortgage. I continue to pay. Can a new lien be placed on my house?

Technically, I could walk from this mortgage as I am legally free from paying it but I plan to finish it. Can another creditor I'm having trouble with and was not included in the original chapter 7 bankruptcy place a lien against me on this home I have no legal obligation to pay? If yes, what if I just walked away from the home? How would the mortgage company deal with it? I don't see how a lien can be placed on a home and mortgage released in chapter 7 but that's why I'm asking. I've never seen this question asked or answered anywhere online. Thank you.

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1 Lawyer Answer
W. J. Winterstein Jr.
W. J. Winterstein Jr.
  • Bankruptcy Lawyer
  • Boyertown, PA
  • Licensed in Pennsylvania

A: Justice Clarence Thomas, in the Dewsnup opinion, wrote for the majority that in a Chapter 7 case, a validly perfected mortgage lien against property cannot be "stripped down", i.e., is not affected by the bankruptcy filing (the opinion strangely held that section 106 of the bankruptcy code simply did not apply).

Your bankruptcy discharge did relieve you of the legal obligation to pay any unsecured deficiency there may be in your mortgage debt. If you "walk away", the holder of the mortgage retains the right to foreclose and sell the property with the proceeds of sale applied to outstanding taxes, the sheriff's costs of sale (poundage), and the balance of the mortgage(s). In other words, while your personal liability for the deficiency may have been discharged, your property remains liable for payment of the mortgage debt.

If "another creditor" takes a judgment against you, it will constitute a lien against your property to the extent of your interest in that property (unless you hold as tenants by entirety under PA law). If you do not arrange for voluntary payment of that creditor's claim, it can proceed to foreclose against your property, and you will continue to be personally liable for any deficiency remaining on the judgment lien.

Timothy Denison agrees with this answer

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