SETTLEMENT on 2nd

[HHM]

Non-starter, 2nd mortgage is not going to settle BEFORE the BK.

The leverage you get to settle the 2nd comes from the fact that you discharge your personal liability on your 2nd mortgage in chapter 7 BK. That leaves the mortgage lender with a worthless foreclosure right. Hence, since, as a practical matter, the lender is not going to foreclose, they will accept a small settlement, usually about 10%, to remove the lien.

As far as funding, it really doesn't matter relative to the BK, since the settlement can only happen after the BK.

[Mensa1]

Tightrope: The asnwers depend mostly based on the Bk exemptions of your state. Each state affords different exemptions. Depending on the homestead exemption in your state, you could end up making your situation worse by settling your 2nd mtg prior to filing Bk by creating more equity in your property. So it all depends on details.

You also want to be very careful about accepting any funds from family members prior to filing b/c it could even effect your means test and you may not qualify for a Ch 7 following the gift. So any funds should flow from family member to creditor directly, not touching your hands at all.

You can discharge a 2nd mtg legally by filing a Ch 13. It strips the mtg lien and converts the debt into unsecured and is paid like every other unsecured creditor over the life of the plan. Just another option.

Lastly, you would likely have better results with settling the 2nd mtg after being discharged, assuming filing Ch 7. At that point you are no longer personally responsible for the mtg, and if the total equity in underwater then the lender has much more motivation to settle since the only place they have left to look for repayment is from the property (with NO equity from which to be paid). Many of these 2nd mtg lender will charge off the debt after a Bk and it can essentially be settled like offers to defaulted cc's; 20-30% on the dollar.

[TEW]

Hypothetical at this point, but if we are able to settle our second, what would be the best way to pay for it and how would it affect the Ch7 filing?

I know waiting till after 341 or a discharge is probably better, but if we are offered a settlement, we will have to jump on it, so it will have to be paid for before BK is filed.

Options:
1. Borrowing from relative who pays it directly to the mortgage bank. Later paying relative back with tax refund before (or after) filing.
2. Money gifted by relative who pays it directly to the mortgage bank.
3. Employer advances future pay and pays bank directly.
4. Refinancing the car (currently paid off, is this even possible with bad credit?) and paying the bank.

Can anyone think of other (better) options?


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It would be best if you learn more about BK before you even think about these things.
Settle what, the loan would be discharged

[tightrope]

Hypothetical at this point, but if we are able to settle our second, what would be the best way to pay for it and how would it affect the Ch7 filing?

I know waiting till after 341 or a discharge is probably better, but if we are offered a settlement, we will have to jump on it, so it will have to be paid for before BK is filed.

Options:
1. Borrowing from relative who pays it directly to the mortgage bank. Later paying relative back with tax refund before (or after) filing.
2. Money gifted by relative who pays it directly to the mortgage bank.
3. Employer advances future pay and pays bank directly.
4. Refinancing the car (currently paid off, is this even possible with bad credit?) and paying the bank.

Can anyone think of other (better) options?


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