Who owns the house after a Chpt 7?

[me90210]

I just had an interesting turn of events.

I included my house and two mortgages in the bankruptcy with the intention of letting it go. Well, I received a few "suggestions" on what to do from my 1st Mortgage holder, so I called them just for the heck of it. Well, I'm only behind 4 months ($5,510.89) right now and have the option of getting caught up and keeping the house.

Now the question is what happened with the 2nd Mortgage holder? Can I get caught up and only pay the 1st or does the 2nd still have a lien on the house?

The 1st mortgage holder is offering a modification with lower payments and a lower interest rate that I can afford. Should I go for it?

The 1st mortgage is $149k, the house is worth $170+. My concern is if I modify the loan, I would essentially be reaffirming it and will be liable, but I was thinking maybe I can get caught up with $5,510.89 and then sell the house on my own?

My main concern is that the 2nd mortgage might come back after me?

[CCsAreEvil]

Well, that's just interesting. So, you surrendered your home in a Ch 7 BK? Since you legally no longer need to repay back the 2 loans, I wonder how the 1st can modify your loan? Well, is it really "modified" or are you actually creating a brand new loan? But then again, that "newly modified" loan is really based on the existing loan? Little fishy.

I would bet the 2nd will come after you if there is money to be made since your principal on the 1st will be easily paid off now with enough leftover to provide profit for the 2nd.

I have no answer, just putting out my thoughts.

Wait, so when did you stop paying on the 2nd? How much is owed on the 2nd?

I would love to do a modify on my 1st. But I would think this would be the proper order in which to do things (if I were to do it). This assumes the 1st can "actually" be modified post-BK:

1. Stop paying 2nd for months on end
2. Wait to hear from 2nd complaining about non-payment
3. Make lien strip offer to 2nd of around 10% of owed balance
4. Assuming 2nd accepts, after 2nd lien is stripped, try to modify 1st

This would be the perfect solution in my opinion post-BK. But I see it as unlikely. Best realistic case would be to get through the 3rd step.

[qsr]

This is a really good question, and I've been wondering how a similar scenario will play out. I'm behind about $17k on payments and fees, but after Ch7, I'll no longer be liable for it. However, if I can get BoA to ride out the Bankruptcy process, I may be able to work out a loan modification of some type (Maybe??) The problem I see is that since I'm no longer liable for the arrears, it may be in their best interest to just sell the house. I've had my trustee sale pushed back a couple of times already, so I don't know if they will even try to lift the automatic stay during my BK7.

Ideally I'll come out of BK with enough income to cover a mortgage, but not sure if it's even legally possible to get a loan mod. And If I DO get a loan mod and they end up foreclosing, won't I be liable for whatever I don't pay after the discharge? In my state deficiency judgments are allowed.

[CCsAreEvil]

I had to re-read the original post again. So, you are NOT post-BK then (your thread title is a little misleading). You are receiving an offer from the 1st to reaffirm your 1st with a loan mod. You do not even know if they'll approve of a loan mod! Don't get stuck with a reaff and the chance of a loan mod not going through. You seem to be way behind on the 2nd, also (4+ months just like your 1st?).

With the numbers you provided, the 2nd will probably force foreclosure on you since it appears they have money to be made (post loan mod on the 1st). IMO, let the house go. You are already behind several payments. I don't see how you would win with a loan mod with that 2nd on there. And I have no idea on how you do a loan mod on a 1st when a 2nd exists.

Again, I don't even know if you can do a loan mod "while" in BK. Lastly, your 2nd's lien remains intact (stays).

[me90210]

No, according to the letter I got from Wells Fargo, I am discharged. I haven't received any legal nofitication from my lawyer or the Trustee, but I expect that to be coming soon. I had a friend file 2 weeks before me and he's already been discharged, that was about 2 weeks ago, so I'm expecting mine any day now.

Just to clarify, its not an offer to reaffirm. As far as they know I'm already discharged. I'm 4 months behind and no foreclosure has started yet. They sent me a letter offering some options and I just happened to call them back.

I guess my question is a lot like this post.

http://www.bkforum.com/showthread.php?t=51892

House value $170ish

1st Mortgage - $149
2nd Mortgage - $88

Now that my BK is discharged without any reaffirmations, I'm not liable for anything right?

But since my 1st mortgage rode out the BK without going into Foreclosure, can I go ahead and modify the 1st mortgage and keep the house for $149?

What happens to the 2nd mortgage, after discharge? Its just gone right?

"Well, that's just interesting. So, you surrendered your home in a Ch 7 BK? Since you legally no longer need to repay back the 2 loans, I wonder how the 1st can modify your loan? Well, is it really "modified" or are you actually creating a brand new loan? But then again, that "newly modified" loan is really based on the existing loan? Little fishy."

Thats one of my questions too, I thought I actually gave the house to the Trustee, but as I understand it now. He only holds stuff while in the process. After the discharge, the bank still has to come get the house from me. I still have to sign documents to release it to them, either Foreclosure, Deed in Leiu or some other means. I also heard that in a BK, the 2nd mortgage is stripped off like any unsecured credit card an the lein is gone.

Is it too good to be true? 2nd Mortgage gone with no lein, I modify the 1st mortgage at $149k and keep the house with $20+ in equity and no other liabilities?

[keepmine]

While you have no legal obligation to pay the 2nd mortgage holder, the lein they have on your property survives bk. They do have the right to foreclose on the home.

Lein stripping is only available in a Chapter 13.

[me90210]

While you have no legal obligation to pay the 2nd mortgage holder, the lein they have on your property survives bk. They do have the right to foreclose on the home.

Lein stripping is only available in a Chapter 13.

Ok, that was the answer I was looking for. So It was too good to be true.

Does anyone know how that works? Whats the best way (less impact on credit) to liquidate the house with both mortgage holders?

I know foreclosure is bad, but can I do a deed in leiu with 2 mortgages?

[OhioFiler]

Ok, that was the answer I was looking for. So It was too good to be true.

Does anyone know how that works? Whats the best way (less impact on credit) to liquidate the house with both mortgage holders?

I know foreclosure is bad, but can I do a deed in leiu with 2 mortgages?

Stripping the 2nd lien has been done post-bk. You would need to negotiate some sort of settlement with the 2nd mortgage holder.

[me90210]

Stripping the 2nd lien has been done post-bk. You would need to negotiate some sort of settlement with the 2nd mortgage holder.

What do I need to ask for?

I seriously don't want to call them if I don't have too.. they're my employer! lol.

[CCsAreEvil]

I seriously don't want to call them if I don't have too.. they're my employer! lol.

You BK'd on your employer? That could possibly (or not) complicate things.

Anyways, at this time, I think you need to really figure out what you are going to do with the 1st because legally, you should be discharged of the debt from the 1st (as well as the 2nd, of course). How do you "modify" a loan on debt you no longer have to pay. Also, do you really plan on catching up on the 1st?

[OhioFiler]

What do I need to ask for?

I seriously don't want to call them if I don't have too.. they're my employer! lol.

Well....that makes it easier to find the right person to talk to about it.

[me90210]

You BK'd on your employer? That could possibly (or not) complicate things.

Anyways, at this time, I think you need to really figure out what you are going to do with the 1st because legally, you should be discharged of the debt from the 1st (as well as the 2nd, of course). How do you "modify" a loan on debt you no longer have to pay. Also, do you really plan on catching up on the 1st?

Well, from my understanding, after the discharge all a BK does is stop the debtor from collecting from you personally. Though I didn't reaffirm the 1st mortgage, I still have the option of paying for it.. if I wanted to.

Someone correct me if I'm wrong but a "discharge" just tells the debtor to stop on collections. Most financial institutions just write it off as a loss and everyone goes on with their lives. Right? Though I still have the option to pay and keep any loans or mortgages I have that were not reaffirmed, I'm not legally obligated to do so.

[QOUTE]How do you "modify" a loan on debt you no longer have to pay. Also, do you really plan on catching up on the 1st?[/QUOTE]

I'm not obligated to pay it and they can't sue or come after me, but it's still a loan thats in my name. I still have to sign over the house back to them one way or another.. If I modify, I'll have to re-sign, much like a new loan or a post bk reaffirm.

I spoke with Wells Fargo this morning and I qualified for their modification, they're going to ask me to pay something like $1k a month for 2-3 months, then after I prove I can pay that, they'll roll the $5.5k late payments into the loan and give me a new one with a lower interest and payments. They're sending me the details in a few days, I have an option to sign and agree or throw it out.

But that was all for not, because I guess the 2nd mortgage holder still has a lein on the house and can come after me if I touch the 1st mortgage?

[BROKEDED]

Maybe I'm way off base here or just don't understand the situation but it seems that the first is going to have to foreclose on the property and buy it at the sale to offer it to you. If the second forecloses, they have to satisfy the first mortgage balance or the first can foreclose on the second mortgage holder. I would guess that the second mortgage would be hard put to sell the house quickly and still make a profit after their expenses.

I believe the first would have to have it free and clear before I would have any dealings with another loan or obligation on that property.

[BCA2009]

I can't understand why you would want to sign a new note on a house you just discharged in BK. Your 2nd is still there and will foreclose eventually if there is any equity to be had. Even if they don't foreclose you could never sell the house without satisfying the 2nd mortgage. The bottom line is if you want to keep the house you will have to pay both notes. Unless you could negotiate a buyout of the second, but you would have to give them at least what they could get thru foreclosure and you would have to pay it in a lump sum. They wouldn't let you make payments on a settlement.

You need to do what you think is in your best interest, but I don't see any upside to re-affirmining a first and not the second. after a chap 7 discharge.

[OhioFiler]

I can't understand why you would want to sign a new note on a house you just discharged in BK. Your 2nd is still there and will foreclose eventually if there is any equity to be had. Even if they don't foreclose you could never sell the house without satisfying the 2nd mortgage. The bottom line is if you want to keep the house you will have to pay both notes. Unless you could negotiate a buyout of the second, but you would have to give them at least what they could get thru foreclosure and you would have to pay it in a lump sum. They wouldn't let you make payments on a settlement.

You need to do what you think is in your best interest, but I don't see any upside to re-affirmining a first and not the second. after a chap 7 discharge.

Some have successfully negotiated a release of the lien for substantially less than the balance owed and less than the equity available.