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2nd mortgage upside down do I need to be current for ch7 to keep home

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    2nd mortgage upside down do I need to be current for ch7 to keep home

    Hi I am going to be filing for chapter 7 very soon but would like to keep my house. I just got approved for a modification on the first mortgage but If I get a few months behind on the second before I file can I lose the house. The current value is 600K and I owe 700K on the first and $290K on the second. The plan is to stop paying the second after I file and since there is no equity on the home the 2nd mortgage wont foreclose. But do I need to be current on an unsecured second at the time I file? THanks

    #2
    Originally posted by BKMarty View Post
    Hi I am going to be filing for chapter 7 very soon but would like to keep my house. . .but If I get a few months behind on the second before I file can I lose the house. . . The plan is to stop paying the second after I file and since there is no equity on the home the 2nd mortgage wont foreclose.
    Your first mistake is to say "since there is no equity on the home the 2nd won't foreclose".

    Too many of you consumers are under the misguided belief that a lender who is under-water simply will not foreclose. The fact is, you are gambling that the lender will not exercise its right to foreclose because of the senior lien. While it is true that the lender most likelywill not foreclose you need to get it out of your head that it can't foreclose. If you fail to deal with the junior lien holder, unless it releases its lien, it can and may foreclose. If you really want to protect your interest and get rid of the junior lien do a Chapter 13 and strip it off or, cut some deal with the lender to pay it some $$ and get a lien release.

    As to your question, "no", you do not have to be current to file a Chapter 7 with the intent to keep the home. You have to bring payments current (or otherwise work it out with the lender) before the lender forecloses under State law if you want to keep it.

    Des.

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      #3
      This has nothing to do with the question asked... but I am curious how you actually pass the means testing for a Ch 7 with enough income to keep a 700K (1st mtg) current?
      Apparently you have looked at this already? I am just curious and do not know, but it seems like it might be an issue with that pymt being 3-4-5K mo? Please enlighten me how you do qualify for a Ch 7 with that type of income? Thanks, and good luck on it.

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        #4
        Hi BKMarty,

        You don't have to be current to file Ch 7, or behind for that matter.

        That said, you owe 700K + 290K = 990K on a 600K house. This is a case right out of the game show, "Lets Make a Bad Deal!" With the Fla housing market not projected to substantially recover in the next decade, and interest rates projected to stay low; ...might be good to get some impartial financial advice about your options.

        That said, (on a roll here) as des said, the 2nd can foreclose, but w/ no equity past the 1st they may be very open to a cash settlement, especially if the 2nd gets discharged in the BK. Some people have reported settling for 5-10% of the balance.

        Whichever way you go, hope it works out for you!

        Tom in Colo
        Ch7 filed 5/12/2010.....341 meeting 6/30/2010....report of no distribution 8/15/2010.....discharged 10/01/2010.....closed 11/09/2010

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          #5
          Originally posted by Mensa1 View Post
          This has nothing to do with the question asked... but I am curious how you actually pass the means testing for a Ch 7 with enough income to keep a 700K (1st mtg) current?
          Apparently you have looked at this already? I am just curious and do not know, but it seems like it might be an issue with that pymt being 3-4-5K mo? Please enlighten me how you do qualify for a Ch 7 with that type of income? Thanks, and good luck on it.
          You can be over median and still be able to file a Ch. 7 - you have to be negative DMI in order to do it after all bills/expenses are done vs. income.

          to the OP - I agree with the others - any reason why you'd want to keep this house given you are so upside down on it? Any reason you havent looked into a Ch. 13 (assuming you qualify for a 7 that is...) to strip the 2nd off?

          Comment


            #6
            Originally posted by Mensa1 View Post
            This has nothing to do with the question asked... but I am curious how you actually pass the means testing for a Ch 7 with enough income to keep a 700K (1st mtg) current?
            Apparently you have looked at this already? I am just curious and do not know, but it seems like it might be an issue with that pymt being 3-4-5K mo? Please enlighten me how you do qualify for a Ch 7 with that type of income? Thanks, and good luck on it.
            As long as your allowable expenses are more than your income leaving you negative at the end of the month you qualify for Bk. Thats why its important to modify and keep the home therefore having a large monthly payment to outweight the high income.

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