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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2863
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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I foreclosed my CA rental property last year. I understand

Customer Question

I foreclosed my CA rental property last year. I understand I am liable on my 1st mortgage (deficient amt) and 2nd (HELOC). I've been getting monthly bills from my 2nd, but I haven't heard anything from the 1st for a year now. Can the 1st and 2nd still go after me if I file chapter 13? If not, then what will?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 7 years ago.
Hi and thanks for your question. If you file chapter 13, you can pay back the deficiency balances remaining after the foreclosure was complete (I assume it was) as an unsecured debt, sometimes as low as 10cents on the dollar. If the property has not foreclosed completely, then you may be able to add into your chapter 13 plan, language that it will be surrendered in full satisfaction of the total claims, thereby leaving no deficiency.
Customer: replied 7 years ago.
I thought Chapter 13 wipes out the 2nd. I am just not sure about the 1st. I received 1099-A
from the 1st and chances are that a 1099-C might follow. Does the BK court adds the deficient amount (1st) to the C13 plan even though the 1st isn't trying to collect?
Expert:  Terry L. replied 7 years ago.
So, in your fact pattern, it sounds like there is no 1st mortgage anymore, and it is taxable income to you (the amount forgiven by the lender after foreclosure -they took a tax write off). You may get one from the 2nd too, otherwise they could still collect on the deficiency balance. You may not need to file bankruptcy at all, but deal with tax repayment. Talk to your tax accountant to be sure.
Customer: replied 7 years ago.
Relist: Inaccurate answer.