Chapter 7 with charge off 2nd mortgage

[ashesanf]

Hello!

Let me start by saying that we have not filed yet, and we are still currently looking into which Chapter would be the best to file under.

My husband and I purchased our home for $200,000. Our lender is Greater Nevada Mortgage Services. We had the loan split into two loans (80/20) to avoid PMI. We are current on our 1st loan but are behind on our second by 12 months. We had a successful loan modification with the first, however the second was denied. We were never told it was denied, and when we went to pay our first online the other day, the second had been put in as a "charge off".

I've done research online and what I'm trying to find out is an accurate response to if the 2nd mortgage is now considered "unsecured". There are several websites that say it is and a few that say otherwise. I understand it has been sent to a collection agency, which we have yet to be contacted by. What we want to do is file Chapter 7 and include our now unsecured second mortgage if that is the case. We are looking to keep our house, and we are not being foreclosed on at this time. Our home is valued below our first mortgage amount.

Thank you

[newbie2]

I'm not quite sure how "charged off" affects the 2nd mortgage, other than the fact that it will probably be sold to a debt buyer. However, a friend of mine is going through something similar. (2nd was charged off and sold to another company) He hired an attorney to negotiate a settlement payoff to the 2nd in return for a release of the lien on the home.

In his case, even though the 2nd was charged off, the lien was not released.

[albacore44]

most likely it is secured. you will need to search county records on your residense address and see if Nevada first filed 2 Leins, one for the 1st and one for the 2nd. if you do have a 2nd Lein, you will need to follow the procedure many of us are doing post BK, to settle the 2nd by offering a lump sum to release the lein.

[momofthree]

Ditto the others, just because the debt has charged off does NOT mean that the lien has been taken off of your home. Therefore, it is not unsecured and not dischargeable in a chapter 7 bankruptcy. However, if your home is underwater, they will not be foreclosing on you and will only get the money back if/when your property value goes back up--at that point, they CAN foreclose, or if you sell the house, they will get any proceeds before you do.

You can strip the 2nd lien and have it discharged and lien released in a chapter 13 bankruptcy.

We plan to live in our home at least until it's paid off (13 years from now), so we opted for the chapter 13 so that we could strip our 2nd entirely and guarantee that they can't try to foreclose on us 5-6 years down the line when we have equity again. We attempted settlement, but were rejected, so I told them to kick rocks and now they're getting nothing from us.

There are those who have successfully settled their second mortgage for pennies on the dollar, and had their lien released that way.