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A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4300
Experience:  Experienced consumer bankruptcy attorney.
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Hello I am considering filing for chapter 7 Banruptcy. I want ta affir

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Hello I am considering filing for chapter 7 Banruptcy. I want ta affirm my house which I will be able to afford the mortgage I feel. But the home equity loan is another story What are the chances the bank would work with me on modifing that loan a little bit to make it affordable. Iam on disability and feel there is little help for me out there I live in the house with my 80 year old mother and we will have a 3000.00 amonth income when September comes I have a lot of credit card debt and a vehicle I am making payments on which I would like to keep.

SavyLawyer :

Hello, and thank you for contacting Just Answer. My name isXXXXX am a bankruptcy law professional, and I look forward to answering your questions this evening.

SavyLawyer :

Home equity loans in a chapter 7 bankruptcy are a tough issue for many debtors to deal with because while the underlying debt still gets stripped away, the lien on the property does not, that is not discharged in bankruptcy. Now, your question as to whether or not the bank will work with you is a good question, and the honest answer is possibly. They certainly do not want to try and force a sale of the property because of the primary mortgage which would likely get in their way of collecting anything on the property. Consequently, they may be more willing to try and work something out with you so that they continue to get paid. Using the bankruptcy and reaffirmation of the first mortgage as leverage may be enough to get the bank to work with you.

SavyLawyer :

I would, however, strongly recommend in such a situation working with a bankruptcy attorney as they may have better luck negotiating with the lender (or at least can accurately communicate why it is in their best interest to work with you).

SavyLawyer :

For a referral to an attorney in Rhode Island, the Rhode Island State Bar Association provides a referral service at:

SavyLawyer :

http://www.211ri.org/find/Details.aspx?OrgId=31631

SavyLawyer :

So, in short, yes, a lender may be willing to work with you to avoid losing the regular payments they are currently getting from you. There is no guarantee, a lender certainly is not required to do so, but some will see doing so as in their best interests (which it really is). Again, working with a knowledgeable bankruptcy attorney will be helpful to your cause.

SavyLawyer :

I hope this helps, and let me know if you need any additional information or need clarification of anything I have said. Otherwise, please remember to RATE my answer so that I can receive credit for my work.

It looks like my original answer did not post for some reason so I am going to try again.

The short answer is yes, a home equity lender may be willing to work with you to try and salvage the loan in or post bankruptcy as it may be in their best interest to do so, particularly if the home does not have a lot of value, and because there is already a primary mortgage on the home that you are planning to reaffirm. Now, the home equity lender is not obligated to work with you, but if it is presented to them in such a way that it demonstrates that it is in their best interest to do so, they may be willing to do so. The issue for them is that if the debt is discharged in bankruptcy, while they still have lien on the property, the underlying debt would be discharged and the lien does not do them much good if the primary mortgage lender has recorded their lien, because any equity would go to that lender first. Consequently, it is in the home equity lender's best interest to try and work something out with the debtor so that payments can continue on some modified basis. Again, not all lenders will be willing to do this, but it certainly is in their best interests.

Because you will be attempting to negotiate with a lender (and because there are plenty of opportunities in a bankruptcy to make a mistake that could harm your case), I would strongly encourage you to consult with a knowledgeable bankruptcy attorney in person before filing. Rhose Island has a helpful attorney referral service that can be accessed at:

http://www.ribar.com/For%20the%20Public/FindingAndChoosingALawyer.aspx

I hope this helps, and let me know if you require any additional information or need clarification of anything I have said. Otherwise, please remember to RATE my answer so that I can receive credit for my work.
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