What is most likely to happen if we stop making our second mortgage?

[onwards]

No one is arguing that the discharge removes one's liability on the loans, but the original post was asking about whether or not BOA would foreclose if one kept paying the 1st and stopped paying the 2nd. They CAN foreclose and the consensus here is that the likely WILL foreclose in this case (but hopefully not).

Edit: By the way, you have to include your house in the bankruptcy (assuming chapter 7); you aren't allowed to pick and choose which debts you put in your bankruptcy. You get discharged and then you can keep the house or not; they can't come after you for the debt, but they can take your house if you stop paying. No free houses...

Exactly, thank you for making the point so eloquently.

The post I was replying to seemed to imply there was some difference between the 1st and 2nd within the BK process, and there simply is not.

The strategy of paying 1st and not 2nd in order to force a cheap settlement of the second - which I am attempting at present - is made possible through the combination of the discharge and low valuation. The latter makes it so the note on the 2nd is effectively worthless, and the former removes the incentive for its holder to foreclose (since they can no longer pursue the deficiency). That's why it has a good chance of working. However, if the holder of both notes is the same bank, then the low valuation does not come into play in the same way - while they still cannot pursue a deficiency, they WILL recover some funds by foreclosing.

[aquavir]

Exactly, thank you for making the point so eloquently.

However, if the holder of both notes is the same bank, then the low valuation does not come into play in the same way - while they still cannot pursue a deficiency, they WILL recover some funds by foreclosing.

I guess if Tucson doesn't want such a high housing payment and is willing to walk, it is a good gamble though. Perhaps with all the extra inventory hitting the market BOA will be happy to be getting with the 1st; I just wonder if they would just sit and wait for the real estate market to recover and foreclose in a few years, which would take any equity built up...although at that point you could look to sell and payoff both.

[tucson]

No one is arguing that the discharge removes one's liability on the loans, but the original post was asking about whether or not BOA would foreclose if one kept paying the 1st and stopped paying the 2nd. They CAN foreclose and the consensus here is that the likely WILL foreclose in this case (but hopefully not).

Edit: By the way, you have to include your house in the bankruptcy (assuming chapter 7); you aren't allowed to pick and choose which debts you put in your bankruptcy. You get discharged and then you can keep the house or not; they can't come after you for the debt, but they can take your house if you stop paying. No free houses...

Well lets hope they don't foreclose ...We know we are not liable for our home any longer but we like our home and we have attempted for a very long time now to work with B of A to no avail. Maybe this will get their attention or maybe it will get us booted only time will tell. My husband made the payment on the first yesterday and skipped the second. I imagine in will be at least a couple of weeks before someone takes notice. Since we seem to be the only one in this situation I will keep you all updated on what happens.

[aquavir]

Well lets hope they don't foreclose ...We know we are not liable for our home any longer but we like our home and we have attempted for a very long time now to work with B of A to no avail. Maybe this will get their attention or maybe it will get us booted only time will tell. My husband made the payment on the first yesterday and skipped the second. I imagine in will be at least a couple of weeks before someone takes notice. Since we seem to be the only one in this situation I will keep you all updated on what happens.

Good luck.

[albacore44]

I'm sure glad my 1st and 2nd are with different banks (Citi-HSBC). i just past 6 months past due on the 2nd. they did send me a notice at 6 months saying "this is not an attempt to collect a debt" if you filed bankruptcy, and if you have we should still keep in contact etc.

[Billssuck]

Just a side note from my situation: Both my 1st and 2nd are also with BOA. We stopped payments 5 months ago and haven't heard squat from them yet. We are in an active ch13 and we modified our plan in May to surrender our home (and they were notified then of our intentions to surrender). Sure is taking alot of time to even get the automatic stay lifted but I'm anticipating something anyday...

[tucson]

UPDATE: After failing to make our HELOC payment before the 15th B of A actually called this morning (are they supposed to do that on a discharged debt?) and during the conversation asked what our intentions were. When I told her we were immediately transferred over to the loan modification department where we started the process for a modification. Apparently I need a letter from our attorney since our case is not closed which allows them to speak to us. Seemed odd but easy enough to do. Fingers are crossed they can come up with something.

[aquavir]

Well they at least seem interested.

[lorrieduke]

Tucson- They are not suppose to call you once your bankruptcy has been filed (not closed). They did the same thing to me and when I told them they shouldn't even be calling me they apologized and quickly hung up, but I had no desire to work out a new loan with them or anything.. I just wanted to be done with it so I could move forward.

Onwards - Maybe you missed what I was trying to convey..... We had a first and a second.. both with Bank of America. When we filed Chapter 7 we made the choice to surrender the house. The bankruptcy judge discharged both or debts, the first and the second and it didn't matter that both notes were held by the same lender. Besides when you agree to "surrender" property you are giving it back and yeah, naturally they still have to go through the normal forclosure process. That's what we were expecting.
It just seems like some people are thinking its different if a note on a first and second are held by the same institution. In my case it made no difference and I was told by the BK attorney we could have kept the house and gotten the second discharged if we choose to do so but since we were severely upside down, we decided to walk.

[aquavir]

In my case it made no difference and I was told by the BK attorney we could have kept the house and gotten the second discharged if we choose to do so but since we were severely upside down, we decided to walk.

This is not true. The 1st and 2nd would have been discharged no matter what (assuming Ch. 7). If you had decided to keep paying the 1st and not the 2nd YOU (or someone on your behalf) would have had to negotiate a settlement with the 2nd (or just have stopped paying and gotten lucky...i.e. they just don't come after you because the cost/benefit didn't work out). But, bottom line, it matters not that you are or or are not going to surrender the property...it still gets included in the Ch. 7.

[onwards]

Onwards - Maybe you missed what I was trying to convey..... We had a first and a second.. both with Bank of America. When we filed Chapter 7 we made the choice to surrender the house. The bankruptcy judge discharged both or debts, the first and the second and it didn't matter that both notes were held by the same lender. Besides when you agree to "surrender" property you are giving it back and yeah, naturally they still have to go through the normal forclosure process. That's what we were expecting.
It just seems like some people are thinking its different if a note on a first and second are held by the same institution. In my case it made no difference and I was told by the BK attorney we could have kept the house and gotten the second discharged if we choose to do so but since we were severely upside down, we decided to walk.

Again, there is no difference between a 1st, 2nd, credit card, or personal loan in a Ch7 case. They ALL get discharged, whether you like it or not, whether the lender is Wells Fargo or your dear old aunt. There is no choice involved.

Your choices with regards to a residence are limited to your intent in terms of staying or moving; are you going to retain possession of it and continue to make payments on the loan, or leave? it's more a matter of convenience (if you choose to walk, by "surrendering", then you simplify the foreclosure process for the lender). The default choice, by the way, is "retain and pay"; the process assumes you intend to live in the same place. But it has NO bearing WHATSOEVER on the status of your personal financial obligation, regardless of which loan you are discussing.

[aquavir]

Let me clarify. You COULD reaffirm the 1st, but I doubt that you could (or would want to) reaffirm the first and not the 2nd, because if you were not able to work anything out with the second you could get smacked with a deficiency judgement by the 1st if the 2nd foreclosed. I would think you would just want to keep paying your 1st (without reaffirming) and take your chances with the 2nd (which is what many on the forum seem to do).

[onwards]

Let me clarify. You COULD reaffirm the 1st, but I doubt that you could (or would want to) reaffirm the first and not the 2nd, because if you were not able to work anything out with the second you could get smacked with a deficiency judgement by the 1st if the 2nd foreclosed. I would think you would just want to keep paying your 1st (without reaffirming) and take your chances with the 2nd (which is what many on the forum seem to do).

May I ask why you would want to reaffirm EITHER loan? what motivation would you have? what does it gain you?

Reaffirming is necessary if you, for example, to keep your car (otherwise it WILL get repossessed, since retain and pay does not exist for cars).

But on a mortgage? why not choose retain and pay?

[aquavir]

May I ask why you would want to reaffirm EITHER loan? what motivation would you have? what does it gain you?

Reaffirming is necessary if you, for example, to keep your car (otherwise it WILL get repossessed, since retain and pay does not exist for cars).

But on a mortgage? why not choose retain and pay?

Actually, here in CT the law is (new last year) that bankruptcy alone does not default the car loan, so if you keep paying, they can't take it; I can walk away from my car whenever I want...I'm thinking of calling and offering them a settlement. I wasn't sure about houses...is there no state in which you MUST reaffirm in order to keep the house? If not, then I agree...why would anyone reaffirm (I guess it could help build your credit faster...but that isn't worth the risk).

[lorrieduke]

Sorry for all the confusion. But because I'm not an attorney and I seriously doubt anyone else in this thread is, we can only speak about our own experiances.
Someone on this thread sent me a private message and told me to contact my BK attorney and have him set me straight on Chapter 7 laws regarding 1st and 2nd mortgages.
I felt there was not a need to do so since I lived through the experiance but I did so anyway.

Via the email he replied and said in our case the lender, (BofA) waived their right on the 2nd and so it was discharged and they can never ever come after me for the balance. Period.
But, I was wrong on one point.. I thought a year ago he told me something about keeping the house and stripping away the 2nd in a Chapter 7 bankruptcy.. According to him and his recent email, you can keep the 1st and it's current terms and do away with the 2nd only in a Chapter 13 bankruptcy or the courts can choose to negotiate a lesser amount instead. Sorry for repeating that part incorrectly.