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VanDLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 833
Experience:  Chapter 7 & 13
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I own a 7 homes, one is my primary, 6 are rentals. They are

Resolved Question:

I own a 7 homes, one is my primary, 6 are rentals. They are all foreclosing. The primary has a 2nd mortgage that is not a purchase money. In the state of AZ, they can file a judgement if it was not a purchase. The lender in 2nd position has threatened that with a letter. I want to short sale the home. The lender in first position agrees. Can I wrap the 2nd lein into a Ch. 7 BK along with the other homes?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  VanDLaw replied 8 years ago.



If you sell the house in a short sale, that note just wouldn't be included in your bankruptcy because it would no longer exist. Any other judgments, liens, or mortgage notes would be included in the bankruptcy and would be discharged. A lender in the second position is just that they get paid second, if the first note is foreclosed on and taken back by the bank, they only get paid if there is money left at auction (which invariably there never is). They need to be included in your bankruptcy so they cannot come after you with a judgment.


All the homes and their mortgages would be included in the bankruptcy, and would be surrendered to the banks.

Customer: replied 8 years ago.
Okay so to be clear. I want to sell my home. The first mortgage will not be included in the BK because it is sold. If the 2nd then comes after me with a judgement, I can include it in the Ch. 7. Correct? Or if the judgement is filed prior to the close of escrow, I can still wrap the 2nd in the BK. Correct? Thank you.
Expert:  VanDLaw replied 8 years ago.
Yes, your analysis is correct! Any mortgages you have still oustanding would be included in the bankruptcy.
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