Facts: 2005-took out SBA loan for $150K for my growing business; 2008: business went belly up and I then discharged the debt in Ch-7 banky; Lender put lien on house and made me assign an interest in my life insurance. Result: loan secured two ways! I wish to do a partial settlement in order to have Lender remove lien--which they have now agreed to do. The problem is that they just notified me yesterday that the "balance owing" will be the unpaid principal plus "accrued interest" at time of pay-out. This means that if I die in 30 years from now the "accrued interest" will be almost triple the amount of the unpaid principal balance! Can they do that if I did NOT reaffirm the debt? I really want them to release the lien, however, I can't risk my estate facing such a debt in the future. TY.
In other words, even if I don' settle, at time of refinance or sale of house (or foreclosure), can the lender get more than the unpaid balance at time of discharge, e.g. "accrued interest to date.". The unpaid balance was about $110K in 2010. (Imagine the "unpaidbalance" if interest is 10% APR and paid from my life insurance in 30 years from now! (That would calculate to $330 in "accrued interest" alone, not including the unpaid discharged balance of $110K!).
Chapter 7 Bankruptcy Attorney
Did you give them the lien rights before the bankruptcy case was filed?
If so, they can "include" the accrued interest on the loan balance. While the bankruptcy may have discharged your obligation to pay them any money, it doesn't remove their lien rights against the collateral. The balance on those lien rights will continue to accrue according to the terms of the instruments that granted them the interest.
Sorry I couldn't offer better news - but hope this helps point you in the right direction
An involuntary lien can be avoided in Chapter 7 under 11 USC 522(f). A voluntary junior debt/lien can be stripped in a Chapter 13 when the stars are aligned. Did your BK atty explain this to you?
I recommend that you get a *paid* consultation with a bankruptcy lawyer. Explain all this to them and find out your options.
There is too much confusion here to parse out to be able to help you. You filed bk or your business? Lien before or after bk? How did they make you sign anything? Whole life or term? i.e. what happens if you just cancel your insurance?
Were any liens stripped? Why not do a subsequent 13 to strip now? Maybe can strip if you reopen case?
All this and more need to be asked, answered, and analyzed. Get an attorney.
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