Is it possible to include a charge off from a second mortage in a bankruptsy thus eliminating that debt? If so, which type of BK and do the terms of the second mortgage matter?
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Read this
To summarize, a bankrutpcy will not remove a second mortgage (short of being able to do a lien strip in a chapter 13).Last edited by HHM; 05-08-2009, 11:40 AM. -
several issues:
I am aware that I will still owe the amount.
The property is in AZ which is a "non-deficiency state". From what I understand, that means that the second mortgage cannot hit me with a deficiency if the house goes to short sale or foreclosure. Is this true?
However, in talking to the second mortgage I was told that if they "charge off" the amount of my second, it cannot be included in a BK. Is that true?
My house is worth 1/2 of what the amount of the first mortgage is. It is in a short sale negotiation process right now although it's not clear if the sale will actually be successful. The second will receive 5K from the first if it does accept the sale.
The second was part of the original loan made to me when I purchased the home. It's never been refinanced and it's not an equity line.
But, if the sale does not go through and I need to let the house go, I need to know if a deficiency judgment or a charge off can be cleared if I file a BK.Comment
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Short sale - Not true (because it's voluntary) so the deficiency stays.
Foreclosure: I will take your word that AZ is non-deficiency, but they may only apply to the "foreclosing lender". If the first mortgage forecloses, the 2nd can presumably come after you...but I will let someone else do that research.
You will list the debt in your BK. When it comes to secured debts, there are 2 types of liability. (1) security interest, (2) personal liability. When you file BK, your "personal liability" does get discharged, but the security interest remains intact.
If the house surrendered or otherwise foreclosed, then YES, the deficiency (if any) is discharged in BK.Comment
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