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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36211
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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We filed a chapter 7 Bk last year and it was discharged 12/2009.

Resolved Question:

We filed a chapter 7 Bk last year and it was discharged 12/2009. We have a 1st and 2nd mortgage on our home. The first mortgage holder filed a motion for relief of stay and it was granted by the court. The 2nd mortgage did nothing during bankruptcy. In fact, the 2nd mortgage holder charged off their loan and now they show a $0 balance on the loan. However, the 2nd mortgage holder has not re-conveyed the deed and it is still showing as a lien with the county recorder. We are in the process of trying to sell the house as a short sale since the value has decreased to the point where the 1st mortgage holder is going to have to take approx. $35,000 less than is owed to them. We have offered the 2nd lien holder $5000 at the end of escrow if they will release their lien so we can get the property sold. So far, the 2nd mortgage holder is not responding to our offer, even though, they will get nothing if the house goes to foreclosure. Is their anything we can do legally?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 5 years ago.

Since you filed for bankruptcy, your personal obligation to pay either loan is discharged, which means that the 2nd lienholder has no way of collecting from you -- it can't even sell the loan to a debt collector. Which means that it would be nuts to refuse your offer, because it's free money.


Unfortunately, the only thing that you could have done to force the 2nd lienholder out would have been to file Chapter 13 and then sue the lender to strip the lien. This is now impossible, and it would have cost you more than $5,000 to do so.


BotXXXXX XXXXXne is that you're wasting your time with a short sale, unless a buyer wants to take the property "subject to" the 2nd lien. Which isn't going to happen.


Not really sure why it matters to you at this point. If it were me, I wouldn't want prospective buyers walking through my home, unless there was money in it for me. So, unless you have some side deal going with the real estate agent (DON'T TELL ME, EITHER, because that's federal felony bank fraud). then you may as well just let the property foreclose.


Hope this helps.


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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36211
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
Thanks for your response. The reason I would rather short sale than foreclosure is that I am a licensed real estate broker and the first lien holder has agreed to allow my company to sell the house and get a commission.
Expert:  socrateaser replied 5 years ago.

Well, your disclosure to the 1st lienholder avoids criminal liability. But, it doesn't really change the outcome, which is that there is no legal means to force the 2nd lienholder to cooperate. All you can do is try to negotiate -- by raising your offer. Though, pretty soon, it may not be worth the effort.


Best of luck.

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