Need Some Advice 1st and 2nd CitiMortgage

[Thomas Crown]

Great Site.

I need some advise on my current situation.

Built a new house in 06, have 1st through Citimortgage 320K 3/1 Libor Arm 6.25% amortized over 40. Have 2nd which was bought by Citimortgage in April. 40k Balloon Payment @ 11.06%, used the funds to pay cc debt. Taxes and insurance are paid by myself and are not in escrow. Total Loans Outstanding $360k.

Just like everyone else, the house is not worth 360K, probably closer to 300K.

I closed my business in April of 2008, and had to file Chap 7 BK. The trustee has filed an extension to my BK case till May 2009. He wants to see my 07 tax returns, which should be done mid Oct.

I got my Old job back, decent salary, plus commission. My income should return to what it was when I had my business in about 2 years, maybe three if the economy keeps sputtering. So right now things are really tight, I am paying the 1st mortgage about 31 days, and have not paid the second mortgage since filing BK in June. Just don't have the available funds. Over 68% of my income goes to the first mortgage.

Citimortgage has sent my Bk attorney a reaffirmation agreement for the second note, NOT the 1st. I have called the BK dept, they won't talk to me because of the BK. I had my attorney write a letter (charged me $300) to see if they would write down the second mortgage. We have never heard anything, and they refuse to talk to me about it.

I would like to keep this house, but eliminate the 2nd mortgage, and lock the 1st mortgage into a fixed rate with out having escrow. I understand I could switch to a chapter 13 BK, and do a cram down, but my attorney, really didn't get into detail about this. I don't think he cares, or thinks I just want to get something for nothing. I also don't want to have to repay more business debt. (FYI the 2nd paid CC's for business debt)

SO my questions are:
Due to the Chap 7 BK, how do I attempt a loan modification? How do I force Citimortgage to begin talks now, versus when my stay of relief is over.

Should I completely stop making my mortgage payments while in BK, as leverage for Citi to do something. Plus they really can't do anything, since they are under the automatic stay, and should they attempt to get it lifted, just fight it.

Should I hire an attorney to do a forensic review on both loans for additional leverage, with money I don't have, unless I stop paying my mortgage.

How long is it possible to forestall the foreclosure on a property?
And what would really happen if I don't pay the 2nd mortgage ever, the 1st and 2nd mortgage will be discharged in the BK, as I will not reaffirm these till Citi works with me. Which means I will be released from the debt obligation, and a better position. (you would think my attorney would answer these questions, but I don't get a direct answer.)

So any help, comments, or advice would be greatly appreciated.

[The Professor]

One thought would be to keep current on the first, pay nothing on the second, and once the discharge is entered on the Chapter 7, file a 13 and develop a wage earner plan that strips off the second. I simply cannot think of a single reason to reaffirm the debt on the second. It is truly unsecured from a practical standpoint given the balance owed on the first exceeds the home's fair market value. You could also try to negotiate with the second, trading their release of the property for a relatively minor payment by you of some money but I'd do that after your discharge has been entered and you are no longer subject to the jurisdiction of the Bankruptcy Court.

Daniel

[Thomas Crown]

Thanks for the quick post.

I believe what you are refering to is a Chapter "20". I asked my attorney about it, he stated that was prior 2005 BK changes. Cannot do it anymore. Or is there a way?