Ch 7 or Ch 13 and HELOC

[Positive9]

Hi everyone,

I have a question for or the attorneys or whoever that may have some information on this.
I own a home that has a 1st and a 2nd (HELOC). My dad and I are both on the first mortgage, the 2nd only has him on. We are really under the water here, but because our 2nd is such a large a month, filing Ch 13 will not work because the house is worth a few grands more than what we owed on the 1st.

My question is this. IF my father file BK, let say Ch 7, will this dissolved the HELOC? Or will they likely come after us and try to get the house. We really want to keep the house.

Any suggestions, thoughts or comments are welcome.

[keepmine]

It won't dissovle the HELOC. It just means it's uncollectable and your father has no obligation to pay it.
However, the lender still has a security interest in the property. They have the right to foreclose but, likely won't since there is likely not enough equity to make it worthwhile.
Once the bk is discharged your father could attempt to negotiate a settlement for pennies on the dollar in exchange for the lender releasing their security interest.

[espo1357]

Hi everyone,

I have a question for or the attorneys or whoever that may have some information on this.
I own a home that has a 1st and a 2nd (HELOC). My dad and I are both on the first mortgage, the 2nd only has him on. We are really under the water here, but because our 2nd is such a large a month, filing Ch 13 will not work because the house is worth a few grands more than what we owed on the 1st.

My question is this. IF my father file BK, let say Ch 7, will this dissolved the HELOC? Or will they likely come after us and try to get the house. We really want to keep the house.

Any suggestions, thoughts or comments are welcome.

My suggestion is to provide more information about your situation, and to do so in a clear way.

Simply put, I don't understand what you are asking here.

We can't help you if we don't know what is going on.

Good luck.

[Positive9]

My suggestion is to provide more information about your situation, and to do so in a clear way.

Simply put, I don't understand what you are asking here.

We can't help you if we don't know what is going on.

Good luck.

Hi there espo1357,

Thank you for your response.

My family and I purchased a home back in 05, we have a house with 2 loans. 1st is $482K with two borrowers, 2nd is $176K with ONE borrower , house is worth about $540K right now. I have some late payments on the 1st due to the loan modification (when we were in the process, they told us to pay "lower" amount base on our income thus leaving portion of the payment unpaid, I was in this process for 2 yrs, so I am about $15k behind on the first).

I was a sole provider paying. I lost my job in 09, making things harder. My question is, how do I get rid of the 2nd?

1) What happens if my father, who is the only one on the 2nd mortgage filed for bankruptcy, can he reaffirmed the first and not the second? He meets the income mean to filed, his health has been poor...etc.

2) Will the second mortgage bank come after the house?

I know that at this point short selling the house is the best and easier (really it's not easier, there's a lot of paper work) option... But if there's a possibility for us to keep the house I would like to as I am now working and making the same amount of money I was making back in 09.

Thank you.

[Positive9]

It won't dissovle the HELOC. It just means it's uncollectable and your father has no obligation to pay it.
However, the lender still has a security interest in the property. They have the right to foreclose but, likely won't since there is likely not enough equity to make it worthwhile.
Once the bk is discharged your father could attempt to negotiate a settlement for pennies on the dollar in exchange for the lender releasing their security interest.

Thank you for this.
That was my thought too... but we'll have to go talk to an attorney on this. I am not sure if I should talk to a bankruptcy lawyer on this or a real estate attorney. It's hard to find a real estate attorney and bankruptcy attorneys I've talked to don't seem to know much about HELOC/real estate stuff.

[Pandora]

My family and I purchased a home back in 05, we have a house with 2 loans. 1st is $482K with two borrowers, 2nd is $176K with ONE borrower , house is worth about $540K right now. ....

1.) My question is, how do I get rid of the 2nd?

2.) Will the second mortgage bank come after the house?

As to question 1: you cant get rid of the 2nd through BK (i.e., strip it) as the house is valued at more than whats owed to the 1st; however you can offer to settle the 2nd somewhere down the road, but it requires cash up front in full to do so. Not all lenders will agree to settle in order to release the lien.

2.) Will they? Its a crap shoot; the question is can they - and yes, they can. They'd have to pay off the 1st in order to do so. Question is - are your mortgages with 2 sep. lenders or the same one?

As to your father - I agree with Keepmine, however the question becomes is he on the 1st loan or co-signer to it; you stated he is...

Never reaffirm - do a pay and stay (ride-through) so that if something happens later down the line, you will not be obligated to repay something you should have discharged in BK.

[Positive9]

As to question 1: you cant get rid of the 2nd through BK (i.e., strip it) as the house is valued at more than whats owed to the 1st; however you can offer to settle the 2nd somewhere down the road, but it requires cash up front in full to do so. Not all lenders will agree to settle in order to release the lien.

2.) Will they? Its a crap shoot; the question is can they - and yes, they can. They'd have to pay off the 1st in order to do so. Question is - are your mortgages with 2 sep. lenders or the same one?

As to your father - I agree with Keepmine, however tge question becomes is he on the 1st loan or co-signer to it,

Never reaffirm - do a pay and stay (ride-through) so that if something happens later down the line, you will not be obligated to repay something you should have discharged in BK.

Pandora,

Thank you VERY much. And to others, this forum has been a peace of mind, if not life saving really. To know that there's others in the same/similar situation it makes me feel less alone.
Back to my questions:

1) If this is a possibility to pay/settle debt with them so they will release the lien, this is a good option to have.
2) No, 1st Mortgage is with Aurora Loan Services, 2nd mortgage (the HELOC) is with BofA

Reaffirmed vs. Pay and Stay, hmmm I have never heard of this. Thank you for the information.

[Pandora]

just remember to settle - be prepared to have a minimum of 5% and as to how high that % could go... it could go up to 100%. As time goes on, the chances increase of being able to settle, but given BOA is your 2nd and Aurora your 1st - BOA may just be asses in the entire situation. The issue is that you will be on the hook for the entire amount of the 1st mortgage since you arent filing - as well as if 2nd chooses not to settle/release - but dad gets discharged of everything - again you take the chance of having the house foreclosed.

There are tons of posts re: not reaffirming - Despritfeya has as great sticky about it

[Positive9]

just remember to settle - be prepared to have a minimum of 5% and as to how high that % could go... it could go up to 100%. As time goes on, the chances increase of being able to settle, but given BOA is your 2nd and Aurora your 1st - BOA may just be asses in the entire situation. The issue is that you will be on the hook for the entire amount of the 1st mortgage since you arent filing - as well as if 2nd chooses not to settle/release - but dad gets discharged of everything - again you take the chance of having the house foreclosed.

There are tons of posts re: not reaffirming - Despritfeya has as great sticky about it

Pandora:
Thank you.
What do you mean by "BOA may just be asses in the entire situation"....?

I wouldn't mind being on the hook for the 1st since now that I am working I will be able to make payments if the 1st would allow me to make payments on those arrears missed payments on top of my monthly payment (that's another negotiation that will be needed if we are going through with this plan).

IF 2nd decide to foreclosed on our home, they will need to pay off the 1st + the late fees and back payments which comes up to almost what the house is really worth (base on the market, will they really go through the trouble to sell the house for $525-$540K and having to turn around and pay Aurora Loan off at $507k?

[Pandora]

BOA hasn't been known to be friendly to those in BK, thats what I mean. I've only seen a handfull of people actually be able to settle their 2nd's with any lender, and thats usually at least a year or more of being late.

You dont WANT to be on the hook for either mortgage - and given you're already late in paying your 1st mortgage - the chances of the 1st foreclosing are even higher. Did you work something out with them for arrears already? If not, then you're in a pickle for sure.

Any reason why you arent considering filing BK along with your father? That way you both can walk away should something take a downward spiral later down the line. Arrears can be paid in a CH. 13....

ETA: in this day and age re: foreclosures - its no holds barred; nothing makes sense when a lender forecloses vs. modifiying. The problem I see is that you do have equity in the house, and given that factor, the 2nd can negotiate a lower buy out price from the 1st. The 1st can also sell for less than whats owed if they wanted to. Bottom line is some money is better than none sofaras the banks are concerned.

[Positive9]

BOA hasn't been known to be friendly to those in BK, thats what I mean. I've only seen a handfew of people actually be able to settle their 2nd's with any lender, and thats usually at least a year or more of being late.

You dont WANT to be on the hook for either mortgage - and given you're already late in paying your 1st mortgage - the chances of the 1st foreclosing are even higher. Did you work something out with them for arrears already? If not, then you're in a pickle for sure.

Any reason why you arent considering filing BK along with your father? That way you both can walk away should something take a downward spiral later down the line. Arrears can be paid in a CH. 13....

ETA: in this day and age re: foreclosures - its no holds barred; nothing makes sense when a lender forecloses vs. modifiying. The problem I see is that you do have equity in the house, and given that factor, the 2nd can negotiate a lower buy out price from the 1st. The 1st can also sell for less than whats owed if they wanted to. Bottom line is some money is better than none sofaras the banks are concerned.

Pandora,

I filed already back in early '10 after being out of work for a year. It was a Ch 7 because I had credit cards that I have NEVER been lat on that raised their interest rate from 9.99% to 15%, some went as high as 27%! This forced me to have to file, but mostly it was an afford to help modify my 1st with Aurora Loan , trust me I didn't think this through... I didn't know about this website until afterward....
I am not sure what my lawyer did the reaffirmed or stay and pay... It was messy because I was trying to do loan mod, and Aurora Loan said I have to sign this and that, and send in paper work (bank statements, w2, tax return etc.). The reason I'm even behind on my first is because of the Loan Mod. They told us to pay lower amount until they figure out what to do with our loan... I don't know

I really want to keep the house for my family if there's a possible way... Or we can try to short sale, which is A LOT OF work, I know this because I have looked into this. We can let it go foreclosed, but you know, the worst thing one can do is doing nothing.

I know that I can make the mortgage payment now if they're willing to work with on the late payments. As for my father, he doesn't make any money, he's older with health issues, his medical bill alone already takes up most of his paychecks...

[espo1357]

sorry I can't be of more help P9, but it looks like others covered you on this.

Also, look into the Hit Hardest Fund, a government program for underwater properties.

[Positive9]

sorry I can't be of more help P9, but it looks like others covered you on this.

Also, look into the Hit Hardest Fund, a government program for underwater properties.

Thank you Espo,

I will. Yes, I am glad I have found this place.
I wished I had found it earlier, because there's a lot of great information and knowledge on here.

At the very least, I don't feel alone anymore. Plus reading all these posts make me feel more educated

[keepmine]

I am not sure what my lawyer did the reaffirmed or stay and pay

You need to find the answer to this question ASAP.
Contact your bk lawyer or, register for a pacer account and see if a reaffirmation agreement was filed.

http://www.pacer.gov/

[Positive9]

[QUOTE=keepmine;531475]I am not sure what my lawyer did the reaffirmed or stay and pay

You need to find the answer to this question ASAP.
Contact your bk lawyer or, register for a pacer account and see if a reaffirmation agreement was filed.



Hi Keepmine,
Thank you, I will do that.

IF my lawyer did do a reaffirmed is there anything that can be done at this point? I already received my discharged...