Question have question about filing bankruptcy and having a consensual Lien

[mm1423]

I'm considering claiming bankruptcy in near future. I am currently on unemployment and under a program called Illinois Hardest Hit(IHDA), they are going to give me a forgivable loan in which they pay the amount it costs to reinstate my mortgage(I'm behind 3 months) and make my monthly mortgage payments until I become employed or up to 18 months. This will put a lien against my home. If I sell the house within 10 years, I pay the loan back if there is a profit from selling. My question is ..after I get job, can I claim bankruptcy when I have a lien on my home. If I claim bankruptcy I plan to reaffirm my mortgage and I would pay back this forgivable loan. I would not be trying to get the lien discharged. I just want to be sure the lien couldn't prevent me from claiming bankruptcy. I live in Illinois.

[tobee43]

is there anywhere in the agreement that claims this loan is secured and non dischargable in a bk? if you list your house in your bk all liens, judgements (also there are a few exceptions) would be covered and included in the bankruptcy.

let's say you take advantage of this program, however, 2 years down the road you still haven't been able to obtain gainful employment and decide to file. you should, unless there is some type contract excluding your agreement with the state cover everything relating to costs with the house with the exception of HOA fees, costs, and dues.

you would NOT want to reaffirm your house, it will give you no choices in the further if something happens, so you are best off to pay and stay as opposed to reaffirming. why? if you do and lose your job, or even if you don't, but you can't make the payments for some reason or other, they can go after you for the balance of the house. if you pay and stay, and DO NOT affirm,( they usually do not force another reaffirmation and if they want you to DO NOT unless you are 1000% certain you want to stay) if your situation changes you can still have the option of walking away without the burden of owning the bank or the state the money. i say this really not understanding IHDA.

oh!! and welcome to the forum!!!

[mm1423]

Thanks for the reply. To clarify your 2nd paragraph, are you stating that you believe I should be able to file bankruptcy regardless if I have the lien.

I understand your point about not reaffirming the house. I should just continue to pay my mortgage but not actually reaffirm the house. Good point.

I have no intentions of "not" paying for my house even if I claim bankruptcy (unless of course I don't find a job for 2 years,etc). But I'm looking at a scenario where I find a job in a couple months, but my debt is so high that I still may claim bankruptcy. I want to make sure if I take advantage of this program with IHDA, I don't have an issue claiming bankruptcy because this lien is out there. I want to be able to still claim bk, keep the house and the lien stays.

[ValleYum]

Would you still qualify for the help if you filed Bankruptcy first (before getting the help from IHDA)?

That could be the "neatest" way to handle this - still not reaffirming the loan (and they can't have you reaffirm after a BK is discharged.)

Just a thought...

[tobee43]

Thanks for the reply. To clarify your 2nd paragraph, are you stating that you believe I should be able to file bankruptcy regardless if I have the lien.

I understand your point about not reaffirming the house. I should just continue to pay my mortgage but not actually reaffirm the house. Good point.

I have no intentions of "not" paying for my house even if I claim bankruptcy (unless of course I don't find a job for 2 years,etc). But I'm looking at a scenario where I find a job in a couple months, but my debt is so high that I still may claim bankruptcy. I want to make sure if I take advantage of this program with IHDA, I don't have an issue claiming bankruptcy because this lien is out there. I want to be able to still claim bk, keep the house and the lien stays.

if you claim bk you can still in most cases get rid of the liens, the lien does not necessarily have to stay until it is secured.

i have the same question as valle...can you still qualify for help if you file?

[despritfreya]

I need to jump in here because I am not sure where this is going.

You apparently qualify for a state program whereby you will borrow funds from the state and grant the state a lien (mortgage) against your residence. It appears that the loan does not need to be repaid until certain events happen. That is fine. This is nothing more than using your home as collateral to obtain a loan and is treated that way for bk purposes. If you take out this loan before filing bk you would list the state agency as a secured creditor - just like your regular mortgage. The state agency would be deemed a “second” lien against the home (third, if you already have a second). You would “stay and pay” as opposed to reaffirming and the lien would need to be paid as it comes due. Just like your regular mortgage, in the context of a Chapter 7, the underlying debt will be discharged but the lien will survive. If you want to keep the home you must pay the creditor pursuant to the terms of the original contract (or any modification you get).

Obtaining a job does not impair your ability to file bk. If you find employment before filing you just have to “qualify” if you want to file a 7.

As a side note, any provision in a contract that asserts the underlying debt is not dischargeable in bankruptcy is simply unenforceable and void.

Des.

[tobee43]

good to know des. i was thinking since it's a contract with the state it may provide other provisions than most contracts. it's good to know it's unenforceable if the OP files bk and includes their mortgage. if it does survive is there anyway to get it removed? such as refi down the road if OP decides to keep the house?

[HHM]

Des beat me to the punch on this one. Ditto what he says.

A lien is a lien. A consensual lien against your residence survives chapter 7 BK, so at some point, the lien must be dealt with...or in this case, sounds like it automatically expires in 10 years.

[mm1423]

Thank you for the responses. The program is available to me now so I don't plan on filing for bankruptcy prior. My main concern was I didn't want anything to possibly prevent me from filing bankruptcy if I have the lien. As I mentioned, I plan to pay the lien back and have no intentions of trying to get the lien discharged. From what I've read and from your responses it sounds like the lien will continue to be there and I'd continue to pay my mortgage (provided I want to keep the house, which is my plan).
Thank you again.....