Chapter 7 - Trying to save the House

[RGMLM]

I do not qualify for Chapter 13 because my debt is to high ($800k first with BoFA, $375k 2nd. with National City & $100k equity Line with National City). If a foreclosure proceeds, BoFA will get their $800k but National City will get very little if anything upon a sale. My house is a construction zone, thus the main reason for the low sales value. Due to a job loss, I am unable to make all the payments, but I can continue making the 1st. payment on my wifes salary. I have currently stopped making payments on all the loans. I would like to keep the house, but at this point I view it from a perspective of if it works out great, if not, so be it. When I file Chapter 7, the debt will be eliminated, but the liens will remain.

Assuming BoFA allows me to get current on the first after the discharge and then continue making payments after the discharge, the question then becomes, how do I get rid of the liens that National City has on the house. If I can't get rid of the liens withy Natinal City, there is no point in paying the
1st. In the current environment, would National City allow me to pay say 5% of the loan balance to buy off the liens? I do not have the cash for a lump sum payment, so they would have to agree to allow me to make a monthly payment. Do any of you have experience with this type of issue?

Also, does anybody have experience with paying the 1st after discharge without a reaffirmation agreement?

Thanks for your input.

[BassBoy]

First off, in order to keep the house and file CH.7 you MUST BE current. That means all mortages MUST BE current.

If you're able to keep the house and continue to pay, you MUST be current on all martgages or you could face foreclosure after your BK discharge. You can't pay the first and "blow off" the second (or third). The second (or third) lien holders could file to foreclose........as long as first lien holder agrees. And I'm not aware of any ways to "pay-off" a mortgage on a home w/o paying it in full. A loan modification after discharge could help you, but I can not comment on that as I did not do a loan mod.

[RGMLM]

It is unlikely that National City will forclose after the loan balances are discharged because they will get nothing after the sale of the house, but they will still have the liens. You are saying that it is not possible to negotiate with BoFA and National City after the discharge but before the foreclosure.

[keepmine]

It is unlikely that National City will forclose after the loan balances are discharged because they will get nothing after the sale of the house, but they will still have the liens. You are saying that it is not possible to negotiate with BoFA and National City after the discharge but before the foreclosure.

Nobody can speak for National City. All you can do is see if they'll negotiate.
Whatever you do, don't reaffirm that 1st until you get a written deal on the other mortgages.

[Chowder]

If you're able to keep the house and continue to pay, you MUST be current on all martgages or you could face foreclosure after your BK discharge.

I was told to be current at discharge. That the BK would hold off the bank until discharge, but I'd better be current at that time, as well as after.

[liboton21]

What if both 1st and 2nd owned by BofA? Can I file 7 and dismissed the 2nd? Should I continue paying the 2nd while in the process of Chap 7?

[biotechsolution]

In a chapter 7 bankrkuptcy the 2nd mortgage lien will always pass through
the bankruptcy unaffected. So a lien will always be attached to the house.

You may be able to work something out the 2nd with regards to a lump sum payoff after the discharge for a certain percentage. Or the 2nd may just sell the loan to a debt collector and they will just wait it out.

[hereforinfo]

A chapter 7 will never "blow off" or discharge the second mortgage or heloc debt. You could ask the lender to accept less than owed, but the chances of them taking 5% are slim at best, especially on a payment plan. Even if they did forgive the rest, you will receive a 1099 for the difference. That's roughly $450k in taxable income! Some of that may be exempt under the mortgage forgiveness act if it's your primary residence, depending on how it was spent. Only the amount used to purchase the property or make improvements is exempt (and you better have receipts). If you took any cash out for other use, you would have to pay income tax on it. Consult a tax specialist before signing anything, if it gets that far. But realistically, no bank is going to gift you half a million dollars. You should call both lenders and ask for a modification.

[liboton21]

Thank you for all the responses. I will just file for C7 but keep the 1st and 2nd plus the car loan. Hope it works.

[StartingOver08]

Don't reaffirm the mortgages at all. Do a ride thru on the mortgages (same with the car, if possible).

Yes, the lien for the second (and other jr liens) remain, but there are posters here that have been able to (or working on) getting the second lien removed after the Ch 7 discharge. You would continue to pay your first on time, but not the second or HELOC - if you are underwater. Look up posts by Liz in CA - she is very close to getting her second removed by offering 10% of the balance in a lump sum in exchange for a release of lien. She has not paid on the second since her discharge. Granted, your second and your HELOC are larger - but it is the same concept. It is an informal lien strip, not really sanctioned by the BK process for a Ch 7 - but seems to be possible now just because of the housing market.

[Avocat0]

Don't reaffirm the mortgages at all. Do a ride thru on the mortgages (same with the car, if possible).

Could you explain what you mean, more specifically, by a "ride thru"? Is this a process?