House listed as collateral on business loan - what can they do

[blaze]

We filed chapter 7 - I am really confused now - We are reaffirming mortgage on house - I asked attny didn't we need to reaffirm another loan and he says no - The loan in question was made to our business (LLC) it is called "revolving demand master borrowing loan" - a business equity line of credit. the business no longer is operating - but our home is listed as collateral for the loan - what does this mean? Attny says they can not foreclose if we do not pay - and it will be discharged in the BK. But they will stil have a lien on the house. So we should keep paying? If we never pay it off then we can't sell the house without paying them first? I am so confused - We are still paying on this loan but could really use the money right now for other expenses. We incuded that payment in our expense schedule. Can they do anything to us whethere or not we keep paying? I guess what I want to know is what will happen is we stop paying? And if we do keep paying can they still do anything to us?

[emoney]

Sir, these are legal questions that only your attorney can answer correctly.
regards,
emoney

[blaze]

yes i know they are legal questions - unfortunatrly my attny is an ******* and does not explain things in depth. he would only say - "you don't reaffirm it - it's a lien - it will be included in the bankruptcy and will be discharged but the lien will still be there". that's all he would say - he actually told me to figure out what it means and what we will do! so i will do some research - i am just trying to figure out whether or not to keep paying right now. i'll dig out the loan paperwork and start there. i know legal advice cannot be given here but if anyone has been through a similar situation I would appreciate hearing about their EXPERIENCE - that is all i am looking for here.

[SUB]

I'm guessing he means your responsibility/debt will be discharged.

It'll have to be paid at some point, like if you sell.

[emoney]

No one on this forum can give you reliable advice on your question for these reasons:
1. State laws are different on liens on homesteads. In Texas a judgment lien on a homestead cannot be used to foreclose on your home. Only at a sale can payment on the lien be required.
2. We do not know what your loan documents say, so do you want us to guess on what your obligations are?

I again urge you to hire an attorney as he can not only check your documents, which you can do, but check how the courts in your state have ruled on the laws that affect your situation.
regards,
emoney

[HHM]

Unfortunately, even between the collective heads of this forum, we do not know everything

Your question is too specific to your individual circumstances that anything we say would be pure speculation.

Essentially, the business loan lender has a non-purchase money security interest in your home. The bankruptcy is NOT going to eliminate the security interest by itself. I can't answer whether then CAN foreclose, but nearly in every state that security interest is second to the primary mortgage, so even if they could foreclose, the business lender would have to pay off the first mortgage before they can get any money. But yes, all things being equal, the lien from the business loan will sit there, accumulating interest, until the house is someday sold.

If the lien is wholly under-secured, meaning, the current market value of the home is less than what is owed on the first mortgage, you might be able to strip the lien (but I am not sure if you can do that in a chapter 7).