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

[pcn]

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).

In AL (I forget which circuit we are in, includes part of FL & GA) the only options you have are 1) reaffirm or 2) surrender. But, because BOA's policy is to NOT do reaffirmations, you just check the reaffirm box and "ride through". So if you had BOA for both, you would in effect do a retain and pay, since you could not have signed any reaffirmation paperwork.

[sunflwrgrl13]

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...

Very interesting that you haven't heard from BoA after 5mo of missing payments. BoA has our 2nd mortgage, and we have missed the last 2mo of payments (plan on filing Ch7 in Nov), and we have already received a certified letter stating that unless the payments are brought up to date by Oct. 2nd the full loan amount will become payable in full.

[onwards]

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.

Well, unless you reaffirmed the 1st then they can never ever come after you for that balance, either.

As for stripping away - yes, that's only available in a Ch13. It's actually more flexible than that; a judge can strip away a portion of a balance down to the market value of a home, leaving a small balance instead. That's the only legal way I am aware of to force a principal writedown for a mortgage. Just make things clear, say you have a 1st for $200K, a 2nd for $50K, and a house that has a MTM value of $150K. In a Ch13, the entire second and $50K of your 1st may be "stripped away" as unsecured debt, and included in your monthly payment plan. 3-5 years later depending on your plan, those would be considered satisfied.

[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.

[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).

[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]

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]

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]

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.

[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]

Well they at least seem interested.

[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.

[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...

[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.

[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.