Chapter 7 Question on 2nd Mortgage- HELP

[rh750]

I will be filing for Chapter 7 in Texas very soon but have a question for the group on a particular instance. Here is the situation:

I plan on keeping my house but behind in my mortgage. Thankfully I have a family member that will help me out financially to get caught up until I get back on my unemployed feet.

My mortgage is an 80/20 loan with 2 different lenders -

$133,000 Wells Fargo, $17,500 Compass Bank. I am 6 months behind on mortgage payments.

I called Wells Fargo and got the reafirmation amount (they have been threatening foreclosure). When I called Compass they told me that the debt has been "written off and reported on my credit rating" (big whoop, my credit is already shot and dead for now). The rep told me I could make payments to get it caught up but she really wasnt your "typical" a-hole collector. I reviewed my my original closing docs and both loans were secured.

The BIG question... if Compass Bank has written off the debt and I file CH7, will the debt be discharged??? Should I make small payments towards the Compass Bank mortgage to keep them from doing anything to me??? Any other input or advice would be great!!!

This is an awesome forum...I have learned so much since being here...What a great support group!

[HHM]

What is the current market value of the home?

In any event, from a legal stand point, the fact that Compass has written it off, in no way effects the legal obligations. The debt is secured debt, and secured debt IS NOT discharged in BK. The holder of a secured claim (or any subsequent holder of the claim) can ALWAYS enforce their claim against the property that secures the debt. However, what does get discharged is any "personal" obligation you might have to pay back the debt in the event the value of the property is less than the amount owed.

Bottom line, you will have to keep paying them (and bring the note current), or else you have a constant risk of foreclosure. A second mortgage holder has the same right to foreclose as the 1st mortgage, but, as a practical mater, if the 2nd forecloses, the proceeds must go to pay off the 1st mortgage holder first. Since most homes don't actually sell at auction, 2nd mortgage holders typically don't foreclose because they don't want to pony-up to pay the first (which they have to).

[rh750]

i thought that would be the case, i just figured since they stated that the debt was written off that they just gave up on trying to collect. i just got a callback from my bk atty who stated pretty much the same. but i guess it doesnt hurt to ask...and hope.

[Walnut]

Hmmm... this might make 13 more attractive unless you can catch up before discharge.

[rh750]

i am definately filing ch7 due to the $33000 in unsecured debt..