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JoeLawyer
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience:  Attorney in the practice of Bankruptcy Law since 1996
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I agreed to do a 2nd & 3rd mortgage ($46,000 combined) with ...

Customer Question

I agreed to do a 2nd & 3rd mortgage ($46,000 combined) with a party that filed chapter 7 and later surrendered the home. I also discovered that my two mortgages are totally wiped out. The 1st mortgage holder is foreclosing on the home. I just received in the mail from the US Bankruptcy Court, "Notice of Chapter 7 Case Closed Without Discharge." It reads....All creditors and parties in interest are notified that the above-captioned case has been closed without entry of discharge as Debtor did not file proof of completion of Instructional Course Concerning Personal Financial Management. If the debtor(s) subsequently files a Motion to Reopen the Case to allow for the filing of the Financial Management Certificate, the Debtor(s) must pay the full filing fee due. What does this mean? And is there a chance of some kind of recourse to recover my mortgages, like a judgment against them?...Thanks, Sandy
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 6 years ago.

Cynthia:

I have potentially good and potentially bad news: The good news is that I do not see how your mortgages could have been wiped out in a Chapter 7. Yes, it is possible that the people who filed bankruptcy may have discharged their liability to pay the mortgages, but mortgages do normally stay attached to the real estate as a lien. Mortgages can generally only be stripped (i.e. completely wiped out) by motion in Chapter 13's under the right circumstances, but not in Chapter 7.

The bad news is that a "Notice of Chapter 7 Case Closed Without Discharge" doesn't normally do anything for the creditors. This just requires the people who filed bankruptcy to pay a fee to reopen their case to file the post-bankruptcy credit counseling certification, and then they will get a discharge. Even if they don't, the automatic stay will remain in effect, making collection impossible.

So, while I do not think a Notice of Chapter 7 Case Closed Without Discharge will do any good for a creditor, it is extremely uncommon for a mortgage to be wiped out in a Chapter 7.

I strongly suggest you take the documents you received from the Bankruptcy Court, the foreclosure action, and your mortgages to an attorney in your area for review. It is possible that you may be able to get money during the foreclosure sale if you do not sit on your rights. Of course, for you to get money the home will have to be worth more than the people owed on the first mortgage, which is very uncommon nowadays, but it is possible.

Sorry i don't have better news =( but I hope this helps and a positive feedback is always appreciated if this was useful to you.

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
JoeLawyer and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 6 years ago.
Thank you Joseph. Unfortunately for me, the 1st mortgage holder has attached so many past dues owed by these people throughout the months, that there is no equity left in the home anymore. A judge already endorsed the amount and the foreclosure process is in full force. Any other suggestions to recover just even a little of my loss?...Thanks
Expert:  JoeLawyer replied 6 years ago.

Sorry to hear that Sandy (sorry I called you Cynthia before due to your screen name), but generally if a first mortgage holder runs up the amount owed to more than a house can sell for, and the people who owed the money received a bankruptcy discharge, then junior mortgage holders are usually out of luck. I still suggest you have an attorney review your documents, but I would not be hopeful. You may at least be able to write off the loss on your taxes though.

If the people who filed bankruptcy want, they may reaffirm the debt with you, which is agree to pay it back. In this case, the people who filed bankruptcy (the debtors) sign a reaffirmation agreement saying they will pay back $x.xx in monthly installments of $x.xx, for xx months at xx% interest. The lender also signs it, and then it is filed with the bankruptcy court. This normally has to be filed before the discharge is entered. The debtors have a time period after discharge to cancel the agreement if they change their minds, but once the cancellation period ends, the debtors are legally required to pay the debt back according to the terms of the reaffirmation agreement.

As a practical matter, it is not normally a good idea for debtors to sign such an agreement since there is nothing in it for them, but sometimes if they are friends with the lender(s), they may do it to promote continued goodwill from the lender.

I have seen lenders ask the debtor's attorney to ask their clients to sign a reaffirmation agreement, usually without success but sometimes it works.

I *hate* giving bad news =(

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

Customer: replied 6 years ago.
Yes, I guess I am sol. I was truly naive and too trusting. The mortgage company they received their loan from was Pavillion Capital Group who sold the loan to Saxon Mortgage Co. Pavillion Capital Group told me that my mortgages were no different than the 1st mortgage holder even in default of the loans. It started out with me carrying 10% and 5 long & grueling months later just before closing I was informed by the loan officer from Pavillion Capital Group that Saxon would only carry 80% of the loan. That is how the 3rd mortgage was born. I ended up paying all of Pavillions highly inflated closing costs also. We all had so much time and money invested, that backing out just did not seem to be an option at the time. Any recourse possible with Pavillion Capital Group?...Thanks
Expert:  JoeLawyer replied 6 years ago.

If you feel like you were defrauded by Pavillion you may have a claim, but these types of claims are tough to win since of course the plaintiff usually signed something with fine print to the lender's advantage.

I'm like you though, I hate to just roll over and eat a loss. I would take your documents to an attorney for review, and tell them what representation Pavillion made to you. I honestly doubt if you will get anything but a tax write off out of this, but for $46,000 I would invest a couple hundred more to at least have an attorney review it. It may be throwing good money after bad, but $46,000 is a lot to eat.

I hate to keep saying "see a lawyer, see a lawyer," but I can't give advice online, only information, nor can I really review all of the documents. If it were me, I would at least spend a little more money seeing a lawyer to be sure if there is no way to collect anything. And no, I'm not just saying that to drum up business for my ilk, but because if there is not a way to collect anything, and like I said I doubt if there is, at least you can sleep at night because you will know you uncovered every stone and didn't just give up with potential options left unexplored. That might help with closure even if it doesn't result in money.

Again, I'm sorry to hear that happened to you. There is a big difference between filing bankruptcy on a huge multimillion dollar corporation an filing on a person who doesn't have money to burn.

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

Customer: replied 6 years ago.
I am sure I did not sign off to anything with Pavillion with the exception of the standard closing forms. I am also certain I have all the e-mail correspondence and at least one that states exactly this. I have been in touch with an attorney here. When I received the letter from the US Bankruptsy Court today (Sat), I just got a tinge of hope and had to know what exactly it was referring to. (Its the weekend and did not want to call him) I knew there had to be a good attorney on-line over the weekend and that is why I sent my question in. Thank you again. I briefly mentioned this deception with Pavillion Capital Group to him and got the impression that it would not go anywhere. Although, I am not certain if I gave him as much information as I have given you. Its a lot of money for someone making ends meet every month. I loose a lot of sleep over this and wish I could turn the clock back and have it to do over. I will revisit this Pavillion thing with the attorney I have been consulting. Joseph, thanks so much for answering so many of my questions. I just did not want to get my hopes up and go through the whole weekend just to find out what you so kindly informed of. Thanks again
Expert:  JoeLawyer replied 6 years ago.

No problem Sandy. I totally understand your losing sleep over this, it is very distressing. But if all you can get out of it is a write off on your taxes, try to put it behind you - it may have cost you money but don't let it cost you stress (I know, easier said than done).

Thank you for the bonus, I appreciate it.

Good luck!

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

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