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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Mortgage company has written off second and third mortgage

Resolved Question:

Mortgage company has written off second and third mortgage as a "bad debt," they have not gone after me as the house is worth the amount of the first only. I realize that a bad debt write off does not make the debt go away, but was wondering if it would be discharged in a Chapter 7... or, if not, would a bank most likely be willing to reaffirm the second and third debt at a reduced rate rather than have the owner file a Chapter 13. (The bank is the carrier of all 3 liens).
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

Hi JACustomer,

Yes - both the second and third mortgages can be discharged in a Bankruptcy - either a Chapter 7 or a Chapter 13. (Chapter 7 is better for you, because you pay nothing to have your debts discharged. With a Chapter 13 you have to pay all disposable income to the Bankruptcy court for up to 5 years.)

 

I think this is what you wanted to know. If not, please let me know.

Thank you.

Customer: replied 5 years ago.
Thank you for your quick response.

My concern is that they are both a mortgage debt and I thought that those were not dischargeable in a Chapter 7. Please clarify.
Expert:  cfortunato replied 5 years ago.

Mortgage debt absolutely is dischargeable in a Bankruptcy. The thing that is not dischargeable is the lien a mortgage company has on property.

In other words, a mortgage company would be able to foreclose on a house if the mortgage were not being paid, even though the debt was discharged in a Bankruptcy.

Customer: replied 5 years ago.
Maybe you are misunderstanding what I am asking... I do not want to lose the house... It is mine. But what I do want to find out is that if I file bankruptcy, is a Chapter 13 the only way to keep my house, having the 2nd and 3rd mortgage virtually go away after the 3 to 5 years without owing anything (if, of course, the value is less than what is owed on the first).
Expert:  cfortunato replied 5 years ago.

Sorry for the misunderstanding!

Yes - if you file a Chapter 13, then at the end of the 3-5 years, both second and third mortgages can be discharged and the liens removed.

 

 

Customer: replied 5 years ago.
My original question was that if they had written it off as a bad debt, is it dischargable with leins removed under a Chapter 7, or, if not, am I in a better position to negotitate (reaffirm) at a lower amount since the house value is not even worth the amount of the first. Or, do they really not care and would rather see me go through a Chapter 13?

Thank you
Expert:  cfortunato replied 5 years ago.
The mortgages, but not the liens, can be discharged in a Chapter 7.
Yes - if you file a Chapter 7 to have the mortgages discharged, you will be in a better position to negotiate with the mortgage companies to have the liens removed.
Yes - mortgage companies generally prefer negotiation of the mortgage - where they will get something - to a Chapter 13 filing, where they may not get anything.
cfortunato and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
Thank you very much, that is exactly what I wanted to know!