2nd mortgage wants to foreclose??

[pepperoncini]

(Asking for a friend...)

BK7 papers were filed in April, 341 in May, currently awaiting discharge.

$72K owed on 1st mortgage
$48K owed on 2nd mortgage
house worth maybe $100K (but I believe that is a high estimation)

They have stayed current on the 1st mortgage, 2nd mortgage they let go 4 months ago. "Reaffirmation" boxes were checked on their schedules, but no papers were signed to that effect on either mortgage.

Today, the bank that is holding the 2nd mortgage called their BK7 atty and is threatening foreclosure.

How worried should they be? The 2nd would have to pay off the first, right?

[HHM]

Correct, the 2nd would need to pay the first in order to foreclose. It is probably an empty threat, but when you try to call a "bluff", your friend needs to be prepared that it might not be a bluff.

[pepperoncini]

Thanks, HHM.

They were aware that the 2nd could start foreclosure proceedings when they stopped paying, but I'm surprised that they heard a thing from the bank. It just doesn't seem like a lot of money to be chasing down.

[HHM]

It sounds like it was a standard collection call with a threat of foreclosure.

[car67]

I am in same boat filed 7 kept first paid 2nd not paid since DEC 09
Trying to get loan modified but we all know the long line for that to happen
So either they can start a foreclosure on a debt that ws discharged and pay off the first and not recover the value of the second in the sale post foreclosure which makes no sense and if they did try that route I would just file a chapt 13 to catch the arrears up and or try and strip if the market continues to weaken!

[SMinGA]

You can file ch. 13 to catch up arrears - but the lien strip will be a no-go for you, since you are not eligible for a chapter 13 discharge unless 4 years pass between filing the 7 & filing the 13. (Stripping the lien and converting the 2nd to unsecured debt, it would become unsecured and therefore the balance would normally be discharged at the end of the 13 plan. But since you just filed 7 - not possible for you to file 13 now that ends in a discharge.)

Unless your original case was filed 4+ years ago? I see in your signature you started as a 13 then converted to a 7. The date of filing stands - how long ago was that? 4 years past that date is when you can file a 13 & lien strip/discharge the unsecured portion.

... I would just file a chapt 13 to catch the arrears up and or try and strip if the market continues to weaken!

[car67]

Spoke with my attorney on this very issue who does complicated 13 and 7s and he told me he has many cases just like this. He claims since the debt was discharged in the 7 and not reaffirmed its not a debt that needs to be discharged a second time. He says the second never raises an issue in a legal manuever like this as they know if I fail the second chapt 13 for the first postion loan the first position gets the house anyways when its upside down and the second has no claim in foreclosure

[pepperoncini]

Spoke with my attorney on this very issue who does complicated 13 and 7s and he told me he has many cases just like this. He claims since the debt was discharged in the 7 and not reaffirmed its not a debt that needs to be discharged a second time. He says the second never raises an issue in a legal manuever like this as they know if I fail the second chapt 13 for the first postion loan the first position gets the house anyways when its upside down and the second has no claim in foreclosure

Interesting scenario, but I don't think that will fly for my friends.

So - my advice to my friends is: Wait. Don't panic (too much). Wait for their discharge which should come this month. Then see how the bank holding the 2nd mortgage proceeds. This could be empty threats.

If they actually file legal documents to initiate foreclosure, stop paying on the 1st mortgage and live in the house rent-free for as long as they can.

Good advice? WWYD?