We filer Chapter 7 in IL approx 6 years ago, Have two mortgages on house- 1st mortgage was reaffirmed- 2nd mortgage was not. We have been paying both pmts- have moved out of the house and have unsuccessfully sold the house over the last year because owe too much partly. 2nd mortgage is not on credit report. Should we even be paying on the second mortgage? What would happen if we do not pay the 2nd mortgage and keep paying the 1st mortgage and keep trying to sell the house? HELP Please..
State/Country relating to question: Illinois
Trying to sell the house. Have been paying both mortgages- 2nd mortgage is not on credit bureau report
If you did not formally reaffirm the 2nd mortgage, you have been discharged from that debt. They still have a lien on the house, but you would have no personal liability on the 2nd mortgage note or any deficiency claim they might ultimately have. Eventually, if you stop paying the 2nd, the 2nd mortgagee will sell the property (presumably to themselves) at foreclosure, subject to the existing first lien. Depending on how much equity cushion exists over the 1st mortgage, that might not matter. Unless the 2nd lienholder is willing to agree to a short sale and you cannot sell it for more than both notes (and you don't try to have a Chapter 7 trustee sell it in a bankruptcy), you'll never be able to sell it.I really can't see a problem with your strategy. Generally I tell people, never lose control of the sale process (to maximize the sale price and minimize deficiency), but in your case you have little or no power to coerce a sale. If you stop paying on the first as well, you force the 1st to foreclose out the 2nd. However, I wouldn't advise this unless you have a person bidding at the foreclosure sale to make sure that the property sells for at least the 1st mortgage amount.It's probably safer to pay the 1st and not pay the 2nd. However, if you could ensure that the property would sell for at least the full amuount of the 1st, you could stop paying the 1st as well and let the 2nd mortgagee's equity pay the carry (through erosion).I hope that helps.
If we quit paying the second mortgage- kept paying the first mortgage and the second mortgagee foreclosed and enough money was made at sale to cover the first mortgage - would this go against our credit?
If we have been paying the second mortgage all along because we knew no different- is this going to look bad because we would quit paying all of the sudden?
First,The second mortgage shouldn't be on your credit after the discharge date. It should show a 0 balance discharged in bankruptcy. Often it isn't, but that is what is correct.If the second mortgage isn't on your credit now, how would paying it or not paying it show up? I guess you are presuming that somehow it starts getting reported after you stop paying. If so, the I refer to the first point in that it shouldn't be there.Your presumption here is that you will keep paying the only valid debt that was reaffirmed in the bankruptcy - the first mortgage. That is not stopping.You are stopping paying on a debt that you don't owe. Now, in fairness, you paid it b/c you were staying in the house and the payment was made to stall foreclosure. Some banks will accept your money for payments on a non-reaffirmed debt and then foreclose anyway. Their point is that the discharge accelerated the debt secured by the lien and they have the absolute right to foreclose at any time. You can't reinstate the payment because the underlying debt is discharged. However, most banks are just happy receiving the payment and won't do anything.In any event, as to your FICO score, there is always the disconnect between reality and what they are reporting. Sometimes the discrepancy is to your favor, sometimes it is not. However, the trick there is to put pressure on the reporting agencies so that the discrepancies are in your favor. I refer people to cmafinancial.com for a very hands-on personal attention method for getting your FICO scores up. A footnote, after bankruptcy, your FICO should go up automatically. To explain: before bankruptcy you had debt; after bankrutpcy you don't have nearly as much. Accordingly your score goes up. I it doesn't, it's because things are not being reported correctly and you need to get someone to help you get it clean.As far as ultimately how much all of this will be reflected in your FICO score, that is really beyond the scope of my expertise.
One thing I do want to point out is that I am asked the question you are asking every one in a while in my practice. My experience is that there are always many, many moving pieces to the question. My initial response is that I really like your strategy, but you do need to find a good local attorney with the right demeanor to help guide you through this, because the consequences of your decision are important.
You rated my service as "poor," which means I didn't answer your question. How can I be of further service? I would like to improve your consideration of me!
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