Second mortgage after bankruptcy

[tcg550]

Hi,

I filed for chapter 7 last year everything was finalized on February 1st.

I originally filled out reaffirmation papers with the bank but for some reason they never filed them with the court. My attorney tells me that means my first and second mortgage were included in the bankruptcy.

I have been making payments and getting statements from both my first and second mortgage companies.

The second has a maturity date in December. I called them a few months ago and asked them what if any options were available to me. They said because it was included in a bankruptcy they couldn't discuss it. I had a hard time geting my attorney to help me with this so I just kept making the payments.

A few weeks ago they sent me a letter with a loan application to fill out so they could discuss a "re-qualify" and get the loan "decisioned".

I decided I should talk to an attorney because now seems like a good time to offer a cash payment for them to release the lien. I figured I would have an attorney do it because there would be paper work to be sure they did release the loan if they accepted my offer.

They really don't seem interested in talking to my attorney as they just sent me another letter that says I have about 10 days to contact them or they may charge off the loan. That is also confusing to me.

I started with a 15% offer. Their response was they would only release the lien if it was paid in full.

My first mortgage is for 130,000 the second is 25,000. My current home value is about 80,000 - 90,000.

It seems as though the second mortgage is not in a position to foreclose. I am not against signing a new note but it seems silly because should things go horribly wrong bankruptcy is not an option.

Any thoughts?

Thanks.

[tcreegan]

Hi tcg,

I decided I should talk to an attorney because now seems like a good time to offer a cash payment for them to release the lien. I figured I would have an attorney do it because there would be paper work to be sure they did release the loan if they accepted my offer. ....very, very, very good move!

...sent me a letter with a loan application to fill out so they could discuss a "re-qualify" and get the loan "decisioned".
...don't seem interested in talking to my attorney as they just sent me another letter that says I have about 10 days to contact them or they may charge off the loan. That is also confusing to me. ....Nothing confusing about this at all, the 'requalify' is an attempt to get you out from under BK protection; the 'you have 10 days' is a pretty standard debt collection tactic to put pressure on you, increasing the odds they can force you into something in their favor.

They said because it was included in a bankruptcy they couldn't discuss it. ...and this makes it really ironic. They won't discuss it, which would be OK since you called, but they will make an attempt to collect it, which is flagrantly against the law.

I am not against signing a new note ...be very very very much against this!

From what you have posted, your 2nd lender is incompetent at best. 15% was a generous offer and they should have jumped at the chance. Their lien is worthless and will be for many years. People here have posted settlements ranging from 4-10% You really have the upper hand now, they have violated the BK discharge injunction. You can hold this against them, tell them you won't take them to court if they put you in contact w/ someone with the authority to agree to settlement terms. Hopefully this person will be reasonable and competent.

Good luck w. this, hope your atty gets on board and works it out in your favor!

Tom in Colo

[tcg550]

My lawyer just called. She said the bank does not want to negotiate. They will accept nothing less than the full amount.

I asked her for an opinion on what to do next but she had no advice. This is what I get for $275 an hour.

I am so frustrated with this I really have no idea what to do. It has been very difficult to get any lawyer to return calls. I have never asked for free advice.

I did read the response above and it makes sense from everything I have read. Even my a lawyer said it makes sense but she offers no help.

Any thoughts on how do proceed by myself? The bank only seems to want to talk about a new loan.

Thanks.

[tcreegan]

Hi tcg,

Just sit on it for awhile, unless the bank has really lost their mind they aren't going to foreclose. Document everything they do, all communication.

If they do try to push you into signing something, paying them $$, theatening adverse actions like "we will charge off the loan," or putting adverse entries on your credit report; then find a young and hungry attorney who will pursue a violation of the BK discharge injunction on a contingency basis. (they get legal fees awarded if they win)

If nothing, wait. It may take awhile before the bank realizes that they aren't going to get anything and something is better than nothing. In the meantime, do a little research to find who in the bank organization actually has authority to make settlements. After 6 months to a year of no payments, contact them with 'you and I know your lien is worthless and will be for years. Lets settle'

If they ask for a new loan, ask back "What do I look like, an idiot?!"

Tom in Colo

[SunshineGal]

Hi TCG,

The first thing I would do is check pacer and make sure that reaffirmation agreement isn't in the file. Then, providing your attorney is correct, I would probably quit paying and wait for their offer. Two things come to mind, first, the 2nd mortgage lender isn't going to be able to foreclose because there isn't enough money to pay off the senior lien. Second, Michigan has a 6 month right of redemption period from the date of the Sheriff's sale as long as you are actually living in the property. It would be a complete waste of time and money for the second lender to initiate a foreclosure.

[tcg550]

Hi TCG,

The first thing I would do is check pacer and make sure that reaffirmation agreement isn't in the file. Then, providing your attorney is correct, I would probably quit paying and wait for their offer. Two things come to mind, first, the 2nd mortgage lender isn't going to be able to foreclose because there isn't enough money to pay off the senior lien. Second, Michigan has a 6 month right of redemption period from the date of the Sheriff's sale as long as you are actually living in the property. It would be a complete waste of time and money for the second lender to initiate a foreclosure.

I checked PACER myself and the only thing I could see was the form where I declared my intent.

I did manage to get a legal aid from my bankruptcy attorney to check PACER a few weeks ago and she told me it was not filed which means it was included in the bankruptcy. My original attorney does not seemed interested in helping out even though I am willing to pay for his services.

I really would like an attorney to check the court records and make absolutely sure it was included and the bank never filed the agreement I signed.

I tried 3 local attorneys today no one is interested. I start every conversation with I will pay for your advice.

I could negotiate myself if I was sure of the facts.

At one point the bank told me it was included in the bankruptcy but they are now behaving as if it wasn't. They even sent me a letter looking for proof of flood insurance, which I have, or they would bill me for a policy.

The original second mortgage bank was taken over by the FDIC within a couple months of the original bankruptcy and sold to a new bank. I'm sure this is where the confusion is.

I will make a few more calls and then contact the bank myself. I just hate the idea of stopping payments even though the likelihood of foreclosures is next to nothing. Although I don't even know how I would make payments when this was an interest only loan that matures next week.

Thanks for replying people.