Hi, I'd like to help you with your questions today.
What do you mean when you say the 2nd mortgage is unsecured? Was it actually a personal loan rather than a mortgage?
2nd mortgage but was a line of credit
your right its secured
im not sure why they havent issued a lien
So it appears that you have a $60,000 2nd mortgage on your home that you'd like to pay off or strip off in bankruptcy. From the bankruptcy perspective, the real problem is that you have $200,000 equity in your home. Thus, if you were to file for bankruptcy, you would probably not be able to strip off or otherwise eliminate the 2nd mortgage. Speaking very generally, a lien strip of a 2nd mortgage (what I believe is what you had in mind) only works when there is NO equity in the property beyond the 1st mortgage. Since you have significant equity over and above even the 2nd lien amount, it is unlikely that a bankruptcy would make sense for someone in your circumstances.
The offer to cut the $60,000 mortgage by 60% (down to $24,000 or so?) seems like a good business deal on its face. Of course, there may be other considerations I'm not aware of.
But it would be completely legal to reduce the 2nd mortgage (in a written and recorded document, of course) and then list your home for sale.
The balance of the (now-reduced) 2nd mortgage would be paid from the proceeds of the sale.
You would want to make sure that there are no restrictions on sale or some kind of financial penalty for selling the property (i.e. "you owe the original amount of $60,000 if you sell within 2 years" or something to that effect) contained in the agreement the 2nd mortgage lender would want you to sign.
Honestly, this is one those things that quite literally sounds too good to be true, so it would be a good idea to have a local attorney review the proposed loan modification agreement before you sign it. Spending a few hundred dollars now on an attorney (just to make sure everything's kosher) could save you a big headache and thousands of dollars down the road.
In a Chapter 7, you would typically either reaffirm (or simply keep paying) the full amount of BOTH mortgages, OR you would stop paying and surrender the property. Unless there are other financial factors (i.e. significant unsecured debt you can't afford to repay) that I'm not aware of, I'm not sure either option would be desirable. Reaffirmation doesn't do much for you (while you could discharge your personal liability on the mortgages, it seems like this is pretty much a non-issue since you have equity in the home). If you stop paying and surrender the property, the Trustee would likely sell your property in a forced sale for well under the market price in order to pay off your unsecured creditors. This is highly undesirable from any perspective.
"As far as I can determine chapter 13 would not help me .. because the value of my property is worth more than the first mortgage and equity line .... thus the equity line could not be stripped is that correct?"
Yes, according to what you've stated, you would have to continue making your regular payments or the house would be foreclosed upon. In a foreclosure sale, you would be unlikely to receive market value for the property, so you would be much better off selling it on your own or through a realtor before it falls into foreclosure.
Unless there are other factors in play here, you don't sound like a very good candidate for bankruptcy (which is a good thing!). Many bankruptcy attorneys offer free consultations, so you might want to contact a local bankruptcy attorney and see if he your she can give you additional insight into your options. Good luck!
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