Why not loan mod after discharge?

[knitty]

There's no NOD yet, and we're in a non-judicial state. Our BK13 was discharged in March, lender has paid past prop taxes, we know foreclosure is next AND I thought we were good with that!
For lots of different reasons we are kicking around the idea of a loan mod, part of the lender's (HSBC) latest form letter. House is underwater about $100k, it was never to be our forever home, and rentals are a little dicey here. I know we have to deal with what it is we really want, and what's in our best financial interests, but here are my questions:

1) would it really be a modification if our financial obligation was discharged?

2) if we got the terms we wanted...lowered % rate and principal reduction (you can stop laughing now!) wouldn't we be back in control, so to speak...could sell house later, etc?

Is it as simple as deciding if you want to stay in the house then you do A, B, or C; if you don't, then just let fc take its' course?
Thanks in advance for help

[despritfreya]

First you must understand that the underlying mortgage is not subject to your Chapter 13 discharge unless your Plan and/or the Order Confirming the Plan stated you were going to surrender the property. Read 11 USC 1328(a).

Second, despite the above, California is an anti deficiency state so, if the residence is lost to a foreclosure down the road it is unlikely that you would have any liability. Further, despite the language of 1328(a), lenders (like most consumers and some bk attnys) don't realize that there is a carve-out for such loans and assume the debt is subject to the discharge.

Third, even if the debt were subject to the discharge, entering into a loan modification would not change that.

Fourth, if you successfully modify your loan with a principal reduction, unless the modification documents state otherwise, you would be able to sell the property and keep the difference. However, most modifications that include deferring (not eliminating) some of the principal, only defer payment of the amount to the end of the loan or the sale of the property, whichever happens first.

There is nothing stopping you from exploring a loan modification. I say go for it.

Des.

[knitty]

Thanks Des, always good info from you
I'll look back at the Plan/Order re the property but I don't recall "surrender" as part of it...we were paying on it outside the Plan payments (without reaffirming) for almost 2 years
I don't anticipate an elimination of some of the principal but if we don't like the terms we haven't lost anything by declining.
Thanks again

[ace300s]

We filed BK7 and included our mortgage in the discharge. Our lender was Citi and we worked out an Adjustment of Terms Agreement. Everything remained the same on the loan except the interest rate was reduced 3% ($346) a month. Our past due payments were added to the end of the loan.

We did not reaffirm the loan, it is not a loan modification, new 30 year note, and the home is still considered discharged in BK7. Our attorney said it was a good deal and that we couldn't anything nice to rent for what our payment is currently.

[LadyInTheRed]

We filed BK7 and included our mortgage in the discharge. Our lender was Citi and we worked out an Adjustment of Terms Agreement. Everything remained the same on the loan except the interest rate was reduced 3% ($346) a month. Our past due payments were added to the end of the loan.

We did not reaffirm the loan, it is not a loan modification, new 30 year note, and the home is still considered discharged in BK7. Our attorney said it was a good deal and that we couldn't anything nice to rent for what our payment is currently.

You must be misunderstanding something. If you executed a new note, it was a refinance, not a modficiation. It is a new debt incurred after you filed BK and is not covered by the discharge. If you executed an agreement to modify the exiting note, then the discharge would apply. If an "Adjustement of Terms Agreement" is all you signed, then it sounds like you modified the existing, discharged note.

If you refinanced the discharged debt, I hope the discharged debt was your original purchase money loan and you refinanced it after January 1, 2013, when Senate Bill 1069 became effective to provide that a loan refinancing a non-recourse loan is also a non-recourse loan. http://leginfo.legislature.ca.gov/fa...01120120SB1069

[ace300s]

You must be misunderstanding something. If you executed a new note, it was a refinance, not a modficiation. It is a new debt incurred after you filed BK and is not covered by the discharge. If you executed an agreement to modify the exiting note, then the discharge would apply. If an "Adjustement of Terms Agreement" is all you signed, then it sounds like you modified the existing, discharged note.

If you refinanced the discharged debt, I hope the discharged debt was your original purchase money loan and you refinanced it after January 1, 2013, when Senate Bill 1069 became effective to provide that a loan refinancing a non-recourse loan is also a non-recourse loan. http://leginfo.legislature.ca.gov/fa...01120120SB1069

I have to admit most of this does confuse me.....

After meeting with my attorney before signing the Adjustment to Terms Agreement, He says we are signing an agreement to modify the existing note. The number of years remaining on the note and everything else is the same. My attorney states that this note still remains discharged in BK7. If we walk away down the road we are not financially liable.

When I get my monthly statement it says this on it...

"This Mortgage Account Statement is for informational purpose only, as this debt may have been included in a Bankruptcy action, or may have been discharged. This is not an attempt to collect, recover or offset the mortgage indebtedness against you personally, but our records reflect that we hold a security interest in your property."

LadyintheRed, does this sound like I'm ok, and the debt is still considered discharged in BK7 and is not a new note?

[LadyInTheRed]

I have to admit most of this does confuse me.....

After meeting with my attorney before signing the Adjustment to Terms Agreement, He says we are signing an agreement to modify the existing note. The number of years remaining on the note and everything else is the same. My attorney states that this note still remains discharged in BK7. If we walk away down the road we are not financially liable.

When I get my monthly statement it says this on it...

"This Mortgage Account Statement is for informational purpose only, as this debt may have been included in a Bankruptcy action, or may have been discharged. This is not an attempt to collect, recover or offset the mortgage indebtedness against you personally, but our records reflect that we hold a security interest in your property."

LadyintheRed, does this sound like I'm ok, and the debt is still considered discharged in BK7 and is not a new note?

Yes, based on the bolded text, that is what it means. Your first post said the opposite.