Question on 2nd Mortgage after Chapter 7 and Foreclosure

[Paulac]

Another victim of the 2008 housing crisis and extenuating situation caused me to no longer be able to afford my home. I bought in 2006, 80/20 no money down for 305k, within 6 months the property was worth about 245k. I was underwater from the start! My husband died and I was no longer able to afford the house. I tried the loan modification, short sale, deed in lieu, tried to get the 2nd to settle so I could sell and avoid any issues but it never happened. I had to walk away, by 2010 the home was valued at 185k. there was no recovering for me in this house. SO I filed chapter 7 in 2014 and released in 2015. From the time I walked away and the foreclosure it was over 6 years (foreclosure is not on my credit report.) It foreclosed last year (june I think). Okay, to my question, yesterday I got a settlement offer from the 2nd mortgage and gives me a balance I owe (57k and some options for repayment in a very short amount of time. ) Didnt' I discharge that in bankruptcy? my credit report states 0 owed and it also says paid. I didn't know that was still following me around. The property was purchased by someone in an auction soon after that. (how did that property sell without both liens being paid in full? I was thinking I was all done with all this and moving on, saving some money, rebuilding my credit and wanting desperately to purchase a new home someday. I'm not sure where to go from here. I did call my bankruptcy lawyer for a sit down but thought someone on here may know what I'm up against? thanks for any insight. Seterus was the 1st and SLS the 2nd.

 

[bgriff]

Unless your BK7 attorney was completely asleep, you would have included the 2nd. You can check your discharge papers and you should see all of the creditors and the balances owed at the time. Additionally, you can contact your attorney and see if you can collect some $'s as the 2nd should have never contacted you regarding payment, it's a violation of the BK code and there penalties that can be collected.

 

[Paulac]

I did send the letter to my attorney and thank you for this input. I appreciate it. made me feel a bit better.

 

[Jzone]

Another victim of the 2008 housing crisis and extenuating situation caused me to no longer be able to afford my home. I bought in 2006, 80/20 no money down for 305k, within 6 months the property was worth about 245k. I was underwater from the start! My husband died and I was no longer able to afford the house. I tried the loan modification, short sale, deed in lieu, tried to get the 2nd to settle so I could sell and avoid any issues but it never happened. I had to walk away, by 2010 the home was valued at 185k. there was no recovering for me in this house. SO I filed chapter 7 in 2014 and released in 2015. From the time I walked away and the foreclosure it was over 6 years (foreclosure is not on my credit report.) It foreclosed last year (june I think). Okay, to my question, yesterday I got a settlement offer from the 2nd mortgage and gives me a balance I owe (57k and some options for repayment in a very short amount of time. ) Didnt' I discharge that in bankruptcy? my credit report states 0 owed and it also says paid. I didn't know that was still following me around. The property was purchased by someone in an auction soon after that. (how did that property sell without both liens being paid in full? I was thinking I was all done with all this and moving on, saving some money, rebuilding my credit and wanting desperately to purchase a new home someday. I'm not sure where to go from here. I did call my bankruptcy lawyer for a sit down but thought someone on here may know what I'm up against? thanks for any insight. Seterus was the 1st and SLS the 2nd.

First step is to review your bankruptcy discharge paperwork. Make sure the 2nd was included.
I am in a similiar situation with chapter 7 from a few years ago. Staying in the house and making payments on the first but not on the second for about 3 years. And no intention to sell.

Bankruptcy wipes out your responsibility for the debt, but the lien does remain. However, if the 1st and 2nd were both discharged, the property basically belongs to both lien holders and they can sell to recover their losses. You would not be responsible for any deficiency balance. For example, if the value of the liens were $200,000 and the foreclosure sale only got $150,000, you would not owe the $50,000 difference.

Now your specific state may have other laws to follow, but I would say you have ZERO responsibility to repay any part of the loan IF it was discharged. If it wasnt included in your bankruptcy, then you have a problem.

 

[Paulac]

Hi Thank you, I did just that and both were included in the bk. I walked away from my home, I could never afford it after my husband died. the house sold in auction last summer, the value of the property at that time was such that even the 1st didn't get it's full money back. boy was that house overpriced, never saw it coming. live and learn.

 

[Erik Sandstrom]

On a side note, if you want to try and qualify for conventional now that you're 4 years beyond the BK. We don't care about when the property forecloses as long as you meet the 4 year requirement from the discharge.

Of if you'd just like to chat about it feel free to get in touch. 619-379-8999