2nd mortgage

[PolishMan]

I am planning on filing chapter 7 in about 6 months. I have about 85000 in cc debt. I am planning on filing without my wife.

I owe 250,000 on 1st mortgage, 2nd mortgage 55,000. House is worth about 300,000. Can you eliminate 2nd mortgage with chapter 7 ? I plan on keeping the house.
I think the 2nd is listed in my name and the wives though. My credit union takes payment out of my check before I get it.

Would I be better off trying to refinance 2nd with lower rate and better terms ? But I dont know if that would be possible since I stopped paying cc a few months ago and my credit rating is deteriorating ?

Any advice appreciated. I am also 2 payments behind on 1st mortgage.

Working on a loan mod for that. Do I have to be current on 1st mortgage to file chapter 7 and keep house ?

[iv65536]

Based on your post the second would likely get something in a foreclosure, and I don't see this as one where you would be able to strip it in Chapter 13, for instance. In my situation, I believe I would be able to strip the second in a Chapter 13 (home worth a bit less than the 1st), but I did file Chapter 7 today, and will be looking into trying to get the 2nd to go away some other way.

[booboo]

I believe that after you 60days are up, the 2nd will start with forclosure and buy out the 1st so they do not loose their position, then sell to reclaim their balance and the balance of the 1st they bought out when they foreclosed.

BooBoo

[iv65536]

Part of my plan is to continue paying the 1st (on which I am current) - the idea is to make it more expensive for the 2nd to try to buy out the 1st and thus reduce or eliminate any profit the 2nd may realize from foreclosing. Endgame is possibly to seek to buy out the 2nd's claim.

[justbroke]

I owe 250,000 on 1st mortgage, 2nd mortgage 55,000. House is worth about 300,000. Can you eliminate 2nd mortgage with chapter 7?

First, there is no lien stripping, as it's called, in a Chapter 7. Second, your second mortgage is "partially" secured, so you couldn't even strip it in a Chapter 13.

Do I have to be current on 1st mortgage to file chapter 7 and keep house ?

While you don't have to be current in order to file and keep the house, you certainly would have fewer issues if your current. Generally speaking, when you file Chapter 7, the lender will usually file a Motion for Relief From the Automatic Stay (MRFS) if you're behind in your payments and/or are surrendering the property. Some folks have actually filed Chapter 7 while being behind in payments... successfully received a discharge, and then filed Chapter 13 before the bank was able to foreclose (I just read such a case!). However, these are far and few between.

If you want to insure that you're able to keep the house, you should be current before discharge. Also, since the 2nd mortgage may not be wholly secured, but is mostly secured, you should really think about the 2nd mortgage. While they wouldn't get all of their money, they could get a lot more than if they did nothing (and home prices continue to decline).

I don't see the 2nd allowing any "significant" settlement since they are 90% secured! Any creditor would rather walk away with 90% (or even 50%) than nothing. Your settlement would be significant... not the typical 10-20% settlements we're seeing these days.

[PolishMan]

Thanks for the responses, just trying to cover all the bases.