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My 1st mortgage has been modified and is now current, but my 2nd is not. In the process of filing chapter 7, the attorney we

Tacoma, WA |

spoke to said that we probably won't be able to keep our home. Is that
true? We would really like to keep our home.

Attorney Answers 4

  1. Yes, that can happen if the 2nd files for Relief of Automatic Stay and it is granted. If you want to keep your home, talk to an attorney regrading converting your Chapter 7 to a Chapter 13. Under a Chapter 13, you may be able to strip your 2nd mortgage and not pay them if the valule of your home is less than how much you own on the 1st. You have options and possibilities so don't lose hope. My best advice is to talk to a couple of Bankruptcy attorneys in your area.

  2. You can keep your home in a Chapter 13, but you will have to create a payment plan to pay back your creditors instead of just discharging all of your debt. In a Chapter 7, you can reaffirm a debt to keep the security property and keep paying the debt. You will need to be current on the payment however. If you really want to keep the house and believe that you can afford the payments after bankruptcy, you may want to devote your funds to get current on your 2nd morgtage and then file Chapter 7 with a reaffirmation agreement on your house. However, I very rarely recommend people file reaffirmations in a Chapter 7 because they usually cannot afford the payments (hence why they are filing for Chapter 7).

  3. You will lose the home unless you can pay both mortgages.

    Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and Massachusetts only and make no attempt to opine on matters of law that are not relevant to those three States. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. Consult an attorney in your locale before you act on any of this advice. You should not rely on this advice alone and nothing in these communications creates an attorney client relationship.

  4. Although the answers above may be the end result (sooner or later) and do offer some alternatives, there is NO CERTAINTY that you will lose your home any time soon based on the information you provided. Your attorney will know your situation better than I can guess though.

    The bottom line is that, eventually some day your house probably will be foreclosed by the 2nd if you do not pay them. BUT THAT MIGHT BE IN 10 YEARS.

    Here are three scenarios
    1. Your home is worth more than the 1st loan plus the 2nd loan.
    2. Your home is worth more than the 1st loan, but not more than the 1st plus the 2nd.
    3. Your home is worth LESS than the 1st loan.

    Scenario 1. The 2nd most likely will foreclose very soon after you stop paying them. Probably best to stop paying the 1st and 2nd at the same time and save up the money until the foreclosure so you will have some cash for first and last on a rental and moving costs.

    Scenario 2. This has the least certainty. It is completely a judgment call by the 2nd as to whether the cost of foreclosure and reselling the house is worth it or not.

    Scenario 3. The 2nd will not foreclose until the property is worth more than the 1st loan amount. For example, many people have not paid their 2nd loan for a year or more, but the 2nd will NOT foreclose because the 2nd has to start paying the 1st after foreclosure and the 2nd will get NOTHING out of the foreclosure. In this situation, you can probably NOT pay the 2nd loan and continue to live in your house for years (depending on local real estate values), but SOME DAY the value of your house will rise above the balance due the 1st and, if the 2nd is still around and watching, they may foreclose then.

    My advice in Scenario 3 is this As long as the payment on your 1st loan is LESS than what it would cost to rent something like your home, STAY THERE AND PAY THE 1ST. You still get the tax break from the interest deduction as a bonus.

    Answers to questions are for general purposes only and do not establish an attorney-client relationship. This is not legal advice, simply information. You SHOULD NOT act on this information without consulting an attorney and providing ALL relevant information.

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