Legal Question in Bankruptcy in California
I filed and had a Chapter 7 discharged recently. I included all of my debts including my 2nd Mortgage which was an Equity Line. A few months later I get in the mail from the 2nd mortgage company a forbearance agreement with new loan terms and an amortization schedule. they want me to sign it and send in my first payment.
are they allowed to do this? the debt was discharged although I am sure the lien still exists against the property.
Do I ignore this? The 2nd is is a seriously negative equity position (1st is current with $700k balance, value is maybe $450k -- 2nd is a $150k balance) --- I doubt they would foreclose, doesnt make any financial sense.
3 Answers from Attorneys
Your secured debt was unaffected by your Chapter 7. If you have a 2nd that is underwater, your lawyer should have filed a Chapter 13 to wipe out the 2nd. Maybe you still can.
The personal liability for the loan was discharged but the lien remains and if you do not pay the bank can foreclose at some point when there is sufficient equity for the second loan holder to get something from the sale of the property in foreclosure. If you are not going to keep the property anyway it does not matter but if you are going to retain the house then you need to take care of the lien for the second mortgage. One way to remove the lien is to file a Chapter 13 case and the other is to work out a deal and pay a certain amount negotiated in exchange for the release of the lien. In some areas you might not be able to remove the lien in Chapter 13 since you are not eligible for a Chapter 13 discharge until after four years of when you filed the Chapter 7 case. You need to consult with a bankruptcy lawyer in your area if you are going to retain the house.
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