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Ask Terry L. Your Own Question
Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2870
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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We filed for bankruptcy in the state of California and due

Customer Question

We filed for bankruptcy in the state of California and due to another legal issue, the bk is still in process. One of our homes that we listed in that bk has a 1st and a 2nd loan and is now in foreclosure. By stopping the foreclosure in order to keep this home, will we have to assume the 1st and 2nd or will the bk wipe out the 2nd.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 4 years ago.

Terry L. :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L. :

Are you filing chapter 7 or chapter 13?

Terry L. :

If you are filing chapter7, the bankruptcy won't strip off the lien. If you do not reaffirm, you are not on the hook for payments, but the loan would need to be satisfied if selling the property down the line. You are only on the hook to make payments on debts you reaffirm. (although you can make payments to pay down the debt).

Terry L. :

If you are in ch13, you can bring a motion to strip off the lien and pay it as an unsecured debt, if the value of the home is less than what is owed on the first mortgage.

Terry L. :

This must be done by motion or adversary, depending on the case and the judge.

Terry L. :

Let me know if you have any questions.

JACUSTOMER-w9vg5kt4- :

yes I do. This problem arises because we are now divorced as of 6/21. He wants me to sign over the deed. This house has a 100k 2nd and a 20 thousand first. I will not sign over the deed if the 2nd goes away and he ends up with this big home for 20k. We filed ch7. So if he reaffirms the loan, does this mean he assumes the 1st and 2nd?

Terry L. :

The 2nd will not be removed, their lien will remain on the home. The second mortgage won't "go away". If he reaffirms the loan (must do so during the case) the debt survives and the signors are responsible for all future payments.

Terry L. :

Bankruptcy discharges debt, it does not remove liens. So if the debt was not reaffirmed, the debt would be discharged, but that 100k lien would still remain on the home.

Terry L. :

If the homes is worth less than 120k there is no equity, and signing it over isn't a big deal.

Terry L. :

Any other questions?