Chase Heloc, Bankruptcy, Lien?

lmichler

LoanSafe Member
May 2, 2017
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Hi i have searched similar threads and have not found any information on this, it may be a very stupid question. Our situation is: we filed Bk 7 in 2010, we had a HELOC with Chase which we stopped paying, never reaffirming the debt but maintained payments for the 1st with HSBC.

My stupid question is at the county recorder's office would there be an actual document titled "lien" filed by Chase or would the original loan document be satisfactory? I question this since there was not "lien" document and the original Open ended deed of trust (dated 2004) had the following stamp on it "Accomodation only.

This instrument filed for record by Ticor Title company is an accomodation only, it has not been examined as to its execution or as to is effects upon the title". We want to refinance the 1st and stay in the house.

Will this trigger something with Chase? Does this document cloud the title if we were to sell? Chase used to send settlement drafts periodically but we have not received one since last year and now when i call i can't get anywhere with them.
 
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Moe Bedard

Call 1-800-779-4547
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Aug 10, 2007
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Hello,

This is not a stupid question because it is not clear. Sometimes the only way to find the lien is through a deep title search rather than just checking with the county recorder. In my 20 years in real estate and in counseling homeowners, I have never seen a 2nd lien disappear or not be called up during a refinance or sell the home.

With that said, I would bet the 2nd lien is still there and it will hinder any refinance attempts unless you negotiate a settlement with them so they can release the lien.
 

lmichler

LoanSafe Member
May 2, 2017
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Hello,

This is not a stupid question because it is not clear. Sometimes the only way to find the lien is through a deep title search rather than just checking with the county recorder. In my 20 years in real estate and in counseling homeowners, I have never seen a 2nd lien disappear or not be called up during a refinance or sell the home.

With that said, I would bet the 2nd lien is still there and it will hinder any refinance attempts unless you negotiate a settlement with them so they can release the lien.
Thanks Moe, i will contact Chase to see if i can get a settlement going.
 
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Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
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456
1,000
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Southern California
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You are welcome and good luck! Please keep us posted on your progress.
 

lmichler

LoanSafe Member
May 2, 2017
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You are welcome and good luck! Please keep us posted on your progress.
I am going to check with Chase, i will need to research some of the threads here to find the right person to talk to at the corporate level. since the general number they were not helpful at all. Correct me if i am wrong, since the loan has been discharged, do you know if there will be tax implications as far as them sending us anything forgiving the debt? I am thinking no, since the debt was discharged and the "settlement" we send is really to get the title clear? Am i wrong? I was thinking of just going to HSBC (they hold the first) and trying to refinance but i do not want Chase to come back for the full amount.

Thanks!!

Laura
 

Moe Bedard

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Hi Laura,

Per the IRS, If your debt is forgiven or discharged for less than the full amount you owe, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs. The canceled debt isn't taxable, however, if the law specifically allows you to exclude it from gross income.

Amounts that meet the requirements for any of the following exceptions aren't cancellation of debt income.

EXCEPTIONS to Cancellation of Debt Income:
  1. Amounts canceled as gifts, bequests, devises, or inheritances
  2. Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers
  3. Amounts of canceled debt that would be deductible if you, as a cash basis taxpayer, paid it
  4. A qualified purchase price reduction given by the seller of property to the buyer
  5. Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program
Amounts that meet the requirements for any of the following exclusions aren't included in income, even though they're cancellation of debt income.

EXCLUSIONS from Gross Income:
  1. Debt canceled in a Title 11 bankruptcy case
  2. Debt canceled during insolvency
  3. Cancellation of qualified farm indebtedness
  4. Cancellation of qualified real property business indebtedness
  5. Cancellation of qualified principal residence indebtedness
LINKS:

https://www.irs.gov/taxtopics/tc431.html

https://www.irs.gov/pub/irs-pdf/p4681.pdf
 

lmichler

LoanSafe Member
May 2, 2017
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Hi Laura,

Per the IRS, If your debt is forgiven or discharged for less than the full amount you owe, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs. The canceled debt isn't taxable, however, if the law specifically allows you to exclude it from gross income.

Amounts that meet the requirements for any of the following exceptions aren't cancellation of debt income.

EXCEPTIONS to Cancellation of Debt Income:
  1. Amounts canceled as gifts, bequests, devises, or inheritances
  2. Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers
  3. Amounts of canceled debt that would be deductible if you, as a cash basis taxpayer, paid it
  4. A qualified purchase price reduction given by the seller of property to the buyer
  5. Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program
Amounts that meet the requirements for any of the following exclusions aren't included in income, even though they're cancellation of debt income.

EXCLUSIONS from Gross Income:
  1. Debt canceled in a Title 11 bankruptcy case
  2. Debt canceled during insolvency
  3. Cancellation of qualified farm indebtedness
  4. Cancellation of qualified real property business indebtedness
  5. Cancellation of qualified principal residence indebtedness
LINKS:

https://www.irs.gov/taxtopics/tc431.html

https://www.irs.gov/pub/irs-pdf/p4681.pdf
Thanks!! That was the worry that it would be included as income, which we did not want.
 
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Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,799
456
1,000
48
Southern California
www.loansafe.org
You are welcome and best of luck!
 

lmichler

LoanSafe Member
May 2, 2017
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Hi again,

I called the recovery department and the HELOC was under the purged accounts. The last "offer" for settlement i received in the mail was in 2015 and it was for a one time payment of $7548.00. I wish i had the money back then but we had medical bills. Anyway the gal, Yolanda, said she could offer a $50,000.00 settlement, they would go 50% (original was $100,000.00). Well that doesn't do me any good in refinancing the 1st, although there is equity available, using that equity would increase the loan payments and right now we cannot afford that and we would end up in the same situation as we were before. There is probably about 150K in equity but i really cannot afford any additional monthly payment. I am thinking maybe i just leave it the way it is. Is there any such thing as refinancing the first without upsetting the apple cart on the discharged 2nd (HELOC)? We do not want to move or sell, i just want to get a fixed 1st.
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,799
456
1,000
48
Southern California
www.loansafe.org
Hello,

There is no way to refinance the first mortgage without the second mortgage subordinating to the first which they will not do unless they get paid. The only other way to get that equity is to sell the home. The problem you have now is they know how much equity you have and may decide to foreclose in order to get their money back.
 

lmichler

LoanSafe Member
May 2, 2017
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2
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56
Hello,

There is no way to refinance the first mortgage without the second mortgage subordinating to the first which they will not do unless they get paid. The only other way to get that equity is to sell the home. The problem you have now is they know how much equity you have and may decide to foreclose in order to get their money back.
Hello,

I have been checking with the 1st on refinancing and allowing an additional amount to take out to pay the 2nd. It looks like, with the estimate she gave me on the added amount $330,000 ($60K to 2nd) we can afford the payment. I also want to see if i can negotiate a better amount with Chase so i can get the 60K reduced. The 1st is asking for a settlement letter but if i have chase do that and the loan does not get approved or do not get the loan then i am afraid i will be in a bad situation and not able to meet the agreement. Also the 1st HSBC who is doing the refi mentioned the following? I feel like it is a catch 22 situation. Do you know of any programs that can help with a situation like this.

If there was a forgiveness of a portion of principal and/or interest on the second mortgage then the request for a cash out refinance of the debt is not permitted. To consider we need the documents from the lender showing the offer to settle at $60K to review before a final decision can be made.

Thanks!!

Laura

Praying for Micah.
 

lmichler

LoanSafe Member
May 2, 2017
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HI Mo,

Hope you had a happy 4th.

I am still plugging away at Chase and my refi. Right now i am trying to work with Chase separately from the refi. I advised them i could get $8000.00 which is all that is in m y 401K. She said as soon as i have the funds to call her and she will submit it to the higher ups to see if the would accept it. 2 years ago they were ready to accept $6,500.00 so i am hoping that the 8K will do the trick. Once i have the funds i am asking her to send me something in writing that confirms that they will release the lien on the house with the payment of the 8K.

Is there anything to be aware of in going through this process? I just checked our bankruptcy papers and we had gone thrugh a Chapter 7. From the information you had before does that mean that the difference of the orignial loan 100K and the 8K (what they would accept) will be taxable as income?

As mentioned before our main concern is to keep the house and remain in it, reason why we want to refi to a 30 year fixed. Increasing the loan amount to give more to chase would increase our monthly payment which at this time is not feasible. The only thing we are looking at in taking out is an additional 6K to pay off credit card debt.

Hope Micah is doing well.

Sincerely,

Laura
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,799
456
1,000
48
Southern California
www.loansafe.org
Hello Laura,

Yes, my 4th was nice and laid back. Micah is also doing much better. Thanks and I hope you had a great 4th as well.

Any money that is forgiven on a loan must be reported to the IRS and yes, it will most likely be considered taxable income.
 

lmichler

LoanSafe Member
May 2, 2017
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2
3
56
Hello Laura,

Yes, my 4th was nice and laid back. Micah is also doing much better. Thanks and I hope you had a great 4th as well.

Any money that is forgiven on a loan must be reported to the IRS and yes, it will most likely be considered taxable income.
 

lmichler

LoanSafe Member
May 2, 2017
9
2
3
56
Hi Moe,

I just received my settlement/approavl letter from Chase for $8000.00. Is there anything else i should ask for once the wire has been sent. The letter states:

"Here's what we'll do aftetr we recieve the payment(s):
* We'll release the lien on the property and cancel the balance associated with the lien."

After I send the wire would like to get from them a satisfaction of mortgaage in case it takes a while to record the release. Mainly because I want to refi ASAP to a 30 year fixed and can send the lender the document to take into consideration. Any red flags i should be aware of or is this the standard procedure - i finally feel there is light at the end of tunnel in getting out of this bankrupcty mess.
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,799
456
1,000
48
Southern California
www.loansafe.org
Hello,

Congratulations!

You should be good to go. Good luck and I hope everything works out for you.
 

ambobcc

LoanSafe Member
Feb 2, 2009
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Hi Moe,

I just received my settlement/approavl letter from Chase for $8000.00. Is there anything else i should ask for once the wire has been sent. The letter states:

"Here's what we'll do aftetr we recieve the payment(s):
* We'll release the lien on the property and cancel the balance associated with the lien."

After I send the wire would like to get from them a satisfaction of mortgaage in case it takes a while to record the release. Mainly because I want to refi ASAP to a 30 year fixed and can send the lender the document to take into consideration. Any red flags i should be aware of or is this the standard procedure - i finally feel there is light at the end of tunnel in getting out of this bankrupcty mess.

Hello, I just came across this thread and have a very similar situation. Do you mind if I ask who did you deal with at Chase regarding the settlement of the heloc? If you have any contact info that's the direction I am want to go too.