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Bankruptcy Options with a second and first mortgage

I currently am in the process of a chapter 7 bankruptcy due to having two loans. The primary is 97K and the home equity is 55K.  The house appraised for 111,000.00 in 2012.  My lawyer told me that as long as I am not 90 days late that the mortgage company cannot foreclose.   Since there is no equity left in the home, I wondered how smart it would be to simply make the payment for the first mortgage while ignoring the second, knowing the second cannot foreclose since they are junior on the deed.
  • August 04 2013 - High Ridge
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Answers (3)

Profile picture for wetdawgs
"knowing the second cannot foreclose"  Nice dream, but this isn't the case.  The second can indeed foreclose.    The house is collateral for the loan, they can take it even if they are second.




  • August 04 2013
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I would recommend you seek the advice of a lawyer that specializes in bankruptcy.  I had a client that had a very similar situation.  She had a first and second mortgage.  She continued to pay the first and didn't pay the second.  She filed a Chapter 7 bankruptcy.  Her second mortgage started foreclosure proceedings and she was forced to sell her home.
I would seek the advice of a lawyer (more than one) before making that decision.
  • August 04 2013
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I am not a lawyer.  However, there are two problems I see.  First, the second can initiate a foreclosure.  Obviously, it's not in their best interest to do so from a payment angle but if the loan is non-performing they may foreclose to get it off their books.  Second, paying some bills and not others in bankruptcy is called "preferential payment" to a creditor.  That can (in my understanding) mess with your bankruptcy proceedings.  All this said, I am not a lawyer and I highly recommend talking to one. 
  • August 04 2013
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