We filed chapter 7 bankruptcy and included our primary residence as "retain and pay. However, we are not current on both first mortgage and home equity loan. We are scheduled to discharge by the end of the month. On modification, here we stand now:
1st mortgage offered an in-home mod by reducing interest rate and extending term that reduce my monthly payment by about $400 and I can afford it. The outstanding 1st mortgage balance is close to what the home currently worth. Bank suggested either I have my BK attorney file a petition to bankruptcy court seeing consent so that the modification can proceed or we wait until the discharge. If they receive a written consent from the court or a discharge letter, they will send original loan document for my signature.
On home equity loan, I have made an wild offer of 5% of the outstanding amount. They sent a written statement suggesting, they will accept the payment to "satisfy" the mortgage and record the satisfaction (did not explicitly says the payment will satisfy 100% of the mortgage and the bank will not have any claim/lien on the property but seems that's what the letter implies.
So the question is what should I do? I talked to my BK attorney. She suggest recording the modification through the BK court is a good idea b/c the bank can't change their mind on terms later on but if I sign the mod before discharge, it might mean I am personally liable again. The attorney think this is a gray area that court still need to make a decision: if a mortgage is NOT reaffirmed during BK, what does modification mean in terms of borrower's personal liability. I told my attorney that if I wait for discharge and not sign mod document, the bank will have the freedom of changing the term and I will have the freedom of walking away. That would be more fair to me.
I can wait for the discharge as well. But what will happen if I make payment to 1st according to proposed modification but choose not to sign the document? Will they proceed with foreclosure? I have asked the 1st mortgage what they think about this legal loop-hole: they can't make me personally liable again on a loan that has been discharged by the bank (it's not a new loan, just update of an existing loan that has been or will be discharged); on the other hand if I sign a modification document promising to pay them on modified terms, how I don't become personally liable again. The loan negotiator talked to bank's attorney and gave me the following answer: "you may not be personally liable for the discharged loan balance now, but you might be liable for any additional charge above and beyond the original loan amount that has been discharged during bankruptcy." That kind of suggest that if I sign modification and agree to pay them at certain terms and then fail to do so in future, until the home will be foreclosed, they will count the unpaid monthly payment until foreclosure and can come after me if they want to. I asked first mortgage if they would include language in mod document such that " modification is intended to bring the homeowner current and it's does not mean new personal financial obligation for the homeowner". They declined to add any such language.
What would you do? Would you close with home equity loan first? I can't get them write explicitly that they will remove lien from the propert? Would you sign the mod before or after the discharge? Would you wait for discharge and then keep making monthly payment but not sign the modification document? WOuld you just wait for discharge and stop paying, live rent free as long as you can and walk away? I wanted to keep the house. The modified monthly payment will be similar to what I will pay for rent anyway. So if there are no string attached, I would prefer to keep it. PLEASE provide me different perspectives. I am confused and my discharge schedule is rapidly approaching.
1st mortgage offered an in-home mod by reducing interest rate and extending term that reduce my monthly payment by about $400 and I can afford it. The outstanding 1st mortgage balance is close to what the home currently worth. Bank suggested either I have my BK attorney file a petition to bankruptcy court seeing consent so that the modification can proceed or we wait until the discharge. If they receive a written consent from the court or a discharge letter, they will send original loan document for my signature.
On home equity loan, I have made an wild offer of 5% of the outstanding amount. They sent a written statement suggesting, they will accept the payment to "satisfy" the mortgage and record the satisfaction (did not explicitly says the payment will satisfy 100% of the mortgage and the bank will not have any claim/lien on the property but seems that's what the letter implies.
So the question is what should I do? I talked to my BK attorney. She suggest recording the modification through the BK court is a good idea b/c the bank can't change their mind on terms later on but if I sign the mod before discharge, it might mean I am personally liable again. The attorney think this is a gray area that court still need to make a decision: if a mortgage is NOT reaffirmed during BK, what does modification mean in terms of borrower's personal liability. I told my attorney that if I wait for discharge and not sign mod document, the bank will have the freedom of changing the term and I will have the freedom of walking away. That would be more fair to me.
I can wait for the discharge as well. But what will happen if I make payment to 1st according to proposed modification but choose not to sign the document? Will they proceed with foreclosure? I have asked the 1st mortgage what they think about this legal loop-hole: they can't make me personally liable again on a loan that has been discharged by the bank (it's not a new loan, just update of an existing loan that has been or will be discharged); on the other hand if I sign a modification document promising to pay them on modified terms, how I don't become personally liable again. The loan negotiator talked to bank's attorney and gave me the following answer: "you may not be personally liable for the discharged loan balance now, but you might be liable for any additional charge above and beyond the original loan amount that has been discharged during bankruptcy." That kind of suggest that if I sign modification and agree to pay them at certain terms and then fail to do so in future, until the home will be foreclosed, they will count the unpaid monthly payment until foreclosure and can come after me if they want to. I asked first mortgage if they would include language in mod document such that " modification is intended to bring the homeowner current and it's does not mean new personal financial obligation for the homeowner". They declined to add any such language.
What would you do? Would you close with home equity loan first? I can't get them write explicitly that they will remove lien from the propert? Would you sign the mod before or after the discharge? Would you wait for discharge and then keep making monthly payment but not sign the modification document? WOuld you just wait for discharge and stop paying, live rent free as long as you can and walk away? I wanted to keep the house. The modified monthly payment will be similar to what I will pay for rent anyway. So if there are no string attached, I would prefer to keep it. PLEASE provide me different perspectives. I am confused and my discharge schedule is rapidly approaching.