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Roger
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residential Californai: bankruptcy filed 10/10 complete 2/11

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residential Californai: bankruptcy filed 10/10 complete 2/11 all debt discharged except 1.25M first and 250k second. First has recently been modified. Can second foreclose or just remain as a lien vs property. Does lien remain at 250k or 250 k plus accrued interest and payment. or was amount due frozen at bankruptcy. what is the statuet period that 2nd must file for judgment. should one wait on statute or make reasonable offer to buy out 2nd and what would be reasonable?
Submitted: 11 months ago.
Category: Legal
Expert:  Roger replied 11 months ago.
Hi - my name is XXXXX XXXXX X'X a litigation attorney. Thanks for your question.

Yes, the second lender CAN foreclose the property if the loan goes into default. The only catch is that if the second lender forecloses, it must take the proceeds from the sale to pay off the first loan BEFORE it can recover any money for itself. Because there usually isn't any equity properties (because of market values), it's usually not to the lender's advantage to foreclose a all it would be doing is working to recover money for the first lender. So, unless there is enough equity in the house for the second lender to pay the first and have something left over, it's not likely that the second lender will foreclose .

As for the account balance, it would be the principal amount plus all accrued interest and late fees and attorney's fees. Thus, the balance could be exponentially more than the principle balance. The bankruptcy doesn't freeze the account or place it on non-accrual - - - the debt continues to gain interest and fees.

Under California law, the lender has 60 years to sue on a Deed of Trust, so there's not likely any chance to wait out the lender because the statute of limitations is so long. Thus, if you want to try to settle the debt, an offer to compromise and settle the debt would have to be made by the borrower/debtor in order to resolve the matter short of foreclosure.
Customer: replied 11 months ago.

there is no equity. Any guidelines as to offer to on seconds that are worth very little.

Expert:  Roger replied 11 months ago.
The problem you face is that because the statute of limitations is SO LONG, the second lender can stand by and allow the borrower to pay the first loan down over the years, and with each payment a little more equity is created. Also, if property values ever turn around, it may be better for the second lender to wait as it's recovery would likely grow with time.

Thus, any offer is going to have to be reasonable enough to make it worth the lender to take the deal - - it's probably going to take $0.50 to $0.60 on the dollar to be able to settle the debt/pay it off.
Roger, Attorney
Category: Legal
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Experience: Litigation Attorney
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