What happens to 2nd Mortgage?

[dogbone33]

I was wondering what happens to the 2nd Mortgage after we file c7? We owe about 62k on the 1st and 12k on the 2nd. Total value of 74k. The house is probably worth 60k if we are lucky (with this economy 4 years ago it appraised at 70k). I read somewhere where since the 2nd mortgage would not be secured since the house isn't worth as much it will be dropped? Just trying to figure out if that is true. We are keeping the house.

[TEW]

the second is not and unsecured loan you have to pay both.

[DaisyMae]

If the value of your house is dropping,

then so is the secured protion of your second mortgage. If you owe a 100,000 first and a 50,000 second, and now your house is wirth 95,000 for example- the second mortgage is now unsecured, and will be discharged just like a credit card balance would be discharged. Also if your mortgage is over the value at all there is talk of the court being able to strip the mortgage to the current market value. Things will be happening...

[happy_ira]

then so is the secured protion of your second mortgage. If you owe a 100,000 first and a 50,000 second, and now your house is wirth 95,000 for example- the second mortgage is now unsecured, and will be discharged just like a credit card balance would be discharged. Also if your mortgage is over the value at all there is talk of the court being able to strip the mortgage to the current market value. Things will be happening...

Whoa. Wait a sec... I have a huge question because my situation is similar to the above and I didn't file anything special:

I have two mortgages on my home: 1st mortgage is $395k, 2nd mortgage is $100k. Recently (a couple months ago), my home was appraised at $390k. (When I originally bought the home in 2006, it was worth $550k, but home prices where I lived have hugely fallen.)

So, based on the info above, the second mortgage is clearly "unsecured". Naturally, I listed all creditors (including 1st and 2nd mortgages on my home) in my chapter 7 filing. The case trustee and US trustee are done with their reviews, and I am now in the waiting period.

SSOOOOO..... do I need to *do* anything in order to get rid of this second mortgage? (I am not reaffirming it.) Or after I get my discharge, do I simply ignore the invoices that come from the 2nd mortgage company?

(Side point: What if they contest the value of $390k (which is certified from a licensed real estate appraiser)?)

Comments, anyone?

[texanboy76]

Whoa. Wait a sec... I have a huge question because my situation is similar to the above and I didn't file anything special:

I have two mortgages on my home: 1st mortgage is $395k, 2nd mortgage is $100k. Recently (a couple months ago), my home was appraised at $390k. (When I originally bought the home in 2006, it was worth $550k, but home prices where I lived have hugely fallen.)

So, based on the info above, the second mortgage is clearly "unsecured". Naturally, I listed all creditors (including 1st and 2nd mortgages on my home) in my chapter 7 filing. The case trustee and US trustee are done with their reviews, and I am now in the waiting period.

SSOOOOO..... do I need to *do* anything in order to get rid of this second mortgage? (I am not reaffirming it.) Or after I get my discharge, do I simply ignore the invoices that come from the 2nd mortgage company?

(Side point: What if they contest the value of $390k (which is certified from a licensed real estate appraiser)?)

Comments, anyone?

my situation is the same as well!!!

My 1st is $419K and the 2nd is $60K. The home when I refied was valued at $560k. I'm going to keep the home and I'm current on payments. Can they do anything if my value is $540K in my neighborhood? I live in Texas and have only 2K in equity since my other was an ARM loan before I re-fied.

[keepmine]

The examples in these posts refer to lein stripping and is available only in a Chapter 13.
In a 7, that 2nd survives bk.

[happy_ira]

The examples in these posts refer to lein stripping and is available only in a Chapter 13. In a 7, that 2nd survives bk.

keepmine - That's what I initially understood. Thanks.

So a follow-up then... if I am *not* reaffirming my first or second (but rather I plan to stay "current" and pay on time), what happens if hypothetically I stop paying my 2nd mortgage. What can they do? There is no equity in the home and they don't really have a secured asset they can come after, can they?

What could the 2nd mortgage co. do?

[keepmine]

The lein will survive bk. They could conceivably foreclose.

[happy_ira]

The lein will survive bk. They could conceivably foreclose.

Got it.

So, if I remain "current" for the life of the loans, no one should come knocking as I understand it, correct?

[liz417]

Got it.

So, if I remain "current" for the life of the loans, no one should come knocking as I understand it, correct?

Okay, but having a "lein" on the house and on your credit report isn't good right? What happens (in the future) when you decide to refinance or buy a car, the lein will show up?

[albacore44]

The lein will survive bk. They could conceivably foreclose.

Yes, however some better lawyers are doing what is called a chapter 20. you file a 7, discharge your unsecured, then follow it up with a 13 and strip the 2nd mortgage. Now the trustee will require the amount of the monthly payment to be paid for 5 years + attorneys fees and the trustee. after 5 years the lein is stripped.

[happy_ira]

Yes, however some better lawyers are doing what is called a chapter 20. you file a 7, discharge your unsecured, then follow it up with a 13 and strip the 2nd mortgage. Now the trustee will require the amount of the monthly payment to be paid for 5 years + attorneys fees and the trustee. after 5 years the lein is stripped.

Wow. Sounds sophisticated but makes sense!

But wait... if someone gets a ch7 approved (meaning, they have monthly negative *before* deducting unsecured cc debt), how can they turn around to file a ch13 (which has to show some kind of payment plan of positive)?

[TEW]

Wow. Sounds sophisticated but makes sense!

But wait... if someone gets a ch7 approved (meaning, they have monthly negative *before* deducting unsecured cc debt), how can they turn around to file a ch13 (which has to show some kind of payment plan of positive)?

[happy_ira]

So, will my lawyer think I am a "whack job" if I ask to file a ch 13 in a few months in order to strip the 2nd?

[TEW]

So, will my lawyer think I am a "whack job" if I ask to file a ch 13 in a few months in order to strip the 2nd?

No you need to make the system work for you. that's what planing is all about BUT do you want to be in BK for the next 3 to 5 with a back breaking plan?