After filing chapter 7 & discharged, do I still need to pay my line of credit?
6 attorney answers
Yes, the house is yours and if you would like to keep the house you will need to pay the 1st and 2nd or you will risk losing the house. To keep the house you need to keep the lien holders happy. You can lose your home if you don't make your payments.
I hope that you have found this information to be helpful.
Parker Evan Bornmann
The Bornmann Law Group, PLLC
1731 West Baseline Rd., Suite #100
Mesa, AZ 85202
Contact me at 480-263-1699 for a free consultation. You and I do not have an attorney-client relationship formed by our communications on this website. Advice given by me on this website is general advice based on partial information. You should not rely on any advice given without first hiring a lawyer in the area where the case is pending, and providing that lawyer with full information. http://www.bankruptcy-az.com
Yes your home is still "yours."
While you may not be personally liable/responsible for either mortgage, if a lender possesses a valid lien (mortgage) it could foreclose on that lien if you (the borrower) stop making payments to them as set forth in your promissory note.
There are practical considerations that may delay/prevent a second lien holder (e.g., line of credit/home equity lender) from foreclosing that interest if you have filed for bankruptcy. For example, if your home is worth less than the amount of the first lien/mortgage the second lien holder would probably avoid/delay foreclosure so as to avoid wiping out its interest in a foreclosure sale (since the proceeds are first applied to pay the first lien holder).
While it is not uncommon for most borrowers in the above scenario to simply stop making payments to the sec on lien holder with little fear of consequence, if market values improve or you try to refinance or modify your first loan, the existence of the second lien could haunt you.
In this instance, it may be advisable to speak to an attorney to discuss your options including a possible settlement with the second lien holder for pennies on the dollar. I have seen them done in both Michigan and Arizona for as little as 8% (though this varies based on the debt to value and location).
Although you discharged your personal liability on the line of credit, the lender is still secured by a lien on the property because liens flow through bankruptcy. You could technically lose your home by being behind on your line of credit payments, but if your home is under water then the line of credit lender doesn't have an incentive to foreclose because the buyer would take the property subject to the first mortgage. Normally reaffirmation agreements must be filed within 60 days of the 341 hearing so you missed the deadline, but the home is still yours. Keep making the first mortgage payments, but beware if the value of the home raises enough to tempt the line of credit lender to foreclose.
This answer is for general informational purposes only and should not be construed as legal advice because it is not legal advice. This answer does not create an attorney-client relationship. I am a debt relief agency who helps people file for bankruptcy under the Bankruptcy Code. You should contact competent legal counsel with specific legal questions. The laws in every jurisdiction are different so this general answer may not be applicable in your jurisdiction. www.lawyersinarizona.com
To answer your questions in reverse order - yes the home is still yours. No you should not reaffirm the second mortgage. Most likely this was the type of loan that you could be used on if you signed a reaffirmation agreement and later the house was foreclosed. So, good news - if you want to keep the house just keep paying the first, second and any HOA. The bad news - if you want to be completely protected you neeed to pay the first, second and HOA.
You might consider filing a chapter 13 case to strip the second lien, assuming the house is worth less than what is owed to the first lender. Attached are some free videos that explain the basics of bankruptcy. Most consumer debtor attorneys offer a free consultation. Think about taking advantage of that offer.
My best to you.
This firm is in the business of helping people and companies file for bankruptcy protection. Therefore, the bankruptcy code requires that we call our firm a "debt relief agency." This information is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the related issues. Nor is this advice intended to create a client - attorney relationship. Every individual's factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state or locality regarding specific information.
The home is yours whether you like it or not.
If you want to keep a property, whether you owe money or not, you must keep the lien holders happy.
Thus, if you want to keep the home, pay the lien holder.
In the past, we have been able to convince second mortgages to accept settlements of less than 10% if the first mortgage was more money than the value of the property.
1845 S. Dobson Rd. Ste 201
Mesa, AZ 85202
We are a debt relief agency. We help people file for relief under the Bankruptcy Code.
Please contact me directly with document for a free 30 minute consultation to get more concrete advice. This is not legal advice. I don't have enough information to give actual legal advice. I can only take the limited information presented and provide a framework to know how your situation may turn out. I may have questions that bring up issues you did not think were important but make a big difference.
Although the bankruptcy discharged your personal responsibility to pay the 2nd mortgage, the lender could still foreclose on your property to collect their money. Housing prices being what they are, they may not do that right now, but when the time comes to sell or refinance, this debt will come back to bite you.
You have a couple of possible solutions - you could lienstrip through a Chapter 13 bankruptcy to remove this debt. Or you may wish to wait to see if this debt is assigned to a debt collector and attempt to settle for a lump sum of cash. I am seeing settlement of 10 - 20% right now in Vegas.
Hope this perspective helps!