2nd mortgage and BK

[aaj67]

I was just approved for a 1st mortgage modification, it is not HAMP!, I also have a 2nd mortgage with the same bank, to my surprise, they refused to modify it. My 1st mortgage balance is 245,000 and my 2nd mortgage balance is 75,000, that's a total of 320,000. My house value at this point is anywhere between 120,000 and 130,000 (Same model as my house located within couple of blocks from my home, just sold for 124,000). At this point, the 2nd is 100% unsecured, that's why I thought the bank will be motivated to modify it. I'm still working with them to get them to modify the 2nd. However, I stopped making payment on all my CCs and the 2nd since September 09.

I might need to file BK. My question is, if I keep making payments on my 1st mortgage (current), can I file BK Chapter 7 and list the 2nd as an unsecured debt?

[keepmine]

You can list the 2nd mortgage and it'll be discharged but, the lein remains.

[aaj67]

You can list the 2nd mortgage and it'll be discharged but, the lein remains.

Ok, so the lien will remain on the house, would this mean that when the time comes to sell my home, the amount owed on the 2nd will be deducted from the proceeds?

Also, can they keep adding interest to the loan balance, or since it was discharged they have to stop accruing interest?

[justbroke]

Ok, so the lien will remain on the house, would this mean that when the time comes to sell my home, the amount owed on the 2nd will be deducted from the proceeds?j

Yes, but here's the kicker. The 2nd would be allowed to accrue interest and fees over that time. This could make it difficult to sell. More than likely, you'll have to short sell the property. You may be able to "settle" with the second lienholder should you accrue enough funds to do so. It appears that nowadays (2009), debtors are able to settle with second lienholders for as little as 10% (on average). Should home prices appreciate over the next several years, and you go to sell then... the second lienholder's appetite for money may have increased with that appreciation.

Also, can they keep adding interest to the loan balance, or since it was discharged they have to stop accruing interest?

Asked and answered.

[aaj67]

Yes, but here's the kicker. The 2nd would be allowed to accrue interest and fees over that time. This could make it difficult to sell. More than likely, you'll have to short sell the property. You may be able to "settle" with the second lienholder should you accrue enough funds to do so. It appears that nowadays (2009), debtors are able to settle with second lienholders for as little as 10% (on average). Should home prices appreciate over the next several years, and you go to sell then... the second lienholder's appetite for money may have increased with that appreciation.

Asked and answered.

Thanks for your response.

Based on that, listing a 2nd in Chapter 7 would not be a good idea. I can simply keep NOT making payments on the 2nd until I save enough money, then I can negotiate a deal. Or I can file Chapter 13 instead. I need to get a free consultation with a BK attorney to help me decide.

[justbroke]

Based on that, listing a 2nd in Chapter 7 would not be a good idea. I can simply keep NOT making payments on the 2nd until I save enough money, then I can negotiate a deal. Or I can file Chapter 13 instead. I need to get a free consultation with a BK attorney to help me decide.

I may have confused things, and for some reason thought you were talking Chapter 13 anyhow. Yes, you have several options while the housing market is in the dumper. I can't say if the options will be available later.

Talking to some BK attorneys could help you decide. The cool thing about stripping the 2nd in a Chapter 13, is that it goes away for good... if you get your discharge!