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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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In 2003 my loan on my house went into foreclosure I had a equity

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In 2003 my loan on my house went into foreclosure I had a equity loan at the time as well. The mortgage company filed court papers for a judgement. It was sent to me and my husband the credit union with the second mortgage, and tax and revenue. I responded and the IRS responded but the credit union didn't so they were sent a default judgment paper. In 2005 we filed bankruptcy chapter 13 and all debts were included. We finished the plan but not all unsecured small debts were paid so we converted to a chapter 7 and all debt was discharged. Now in 2013 we are selling our house but the credit union is claiming a lien on an amount that was covered in the chapter 13 case it was an unsecured amount it half of the amount was paid half not. Can they do this? Is this legal?

Good morning Angela,

I'm Doug, and I'm sorry to hear of the confusion. My goal is to provide you with excellent service today.

I empathize with your situation, and unfortunately, this is a problem that many bankruptcy attorneys don't discuss with their clients---regarding the effect of mortgage liens after the bankruptcy.

If the value of your house was less than the first mortgage and the HELOC at the time of your chapter 13, then the HELOC would have been stripped from the property and you would owe nothing now.

Chapter 7 bankruptcy only discharges your debt to the lender---meaning that the lender cannot sue you in court and seek a judgment against you. Bankruptcy does not automatically give you the property free and clear of the lien claim of the lender though.

When you file bankruptcy, you avoided the possibility of being sued for the debt, but the lien from the mortgage/HELOC may well have remained intact.

If the HELOC remained intact, that means that they are entitled to be paid from the sale of your property if they had a deed of trust or trust deed on the house---BUT, only to the extent that their claimed debt was secured by the property at the time of the bankruptcy. Any unsecured debt---debt for which you did not pledge your property as collateral---would not be recoverable by the lender.

Any unsecured debt from the chapter 13---if you finished the payments in that plan before filing chapter 7---would have been discharged, leaving only the possibility of secured debts being valid.

However, if you did not finish paying the chapter 13 plan, and concerted to 7, any secured lien would still be viable as a lien on your property.

I understand that you may be disappointed by the Answer you received, as it was not particularly favorable to your situation. Had I been able to provide an Answer which might have given you a successful legal outcome, it would have been my pleasure to do so.

If you have additional questions, you may of course reply back to me and I will be happy to continue to assist you further until your questions have been answered to your satisfaction.

Thank you,


Customer: replied 3 years ago.
I'm sorry I didn't explain that we paid the primary mortgage lender. We paid what was owed to them brought up the home loan. This situation is geared to the 2nd mortgage lender. This credit union cross collateralized we in fact have paid off the 2nd mortgage since then and anything secured has been paid off. They are charging me for a loan balance difference from the sale of a blazer that was repossessed. So here's again my question. I have paperwork from the court stating they "the credit union" have a default judgement because they didn't respond to the first claim back in 2003 when we first were being foreclosed by our primary lender. Now the credit union is claiming a judgement for the balance due on the repossessed blazer. Which the half the balance due was paid for in the chapter 13 They don't have a new lien on file they are going off the lien filed back in 2003. Which all the secured debt had been paid.
This is really no longer a real estate question but a bankruptcy question. I will switch the question over to bankruptcy.

I am unable to further assist you in this matter, and I am going to opt out of your question and open this up for other professionals.

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There is no need for you to reply at this time as this may "lock" your question back to me, thus inadvertently delaying other professionals' access to it.

I apologize for any inconvenience and wish you well in your future.


Hi - my name is XXXXX XXXXX I am a Bankruptcy and Consumer Protection attorney here to assist you.

A Bankruptcy can automatically discharge debt, but cannot automatically remove liens that have already been placed on property. To have liens removed in a Bankruptcy, you have to file a separate "522(f) Lien Avoidance" motion with the Bankruptcy court. This is normally done before a Bankruptcy case is closed.
However, if your Bankruptcy case has already been closed, and if you want the lien removed, you would have to: 1) file a motion with the Bankruptcy court to have the case re-opened, and then 2) file the 522(f) Lien Avoidance motion with the Bankruptcy court to have the lien removed.
You should be able to get the necessary forms for these motions and instructions from the clerk at the Bankruptcy court.

I think this is what you wanted to know. If not, please let me know.
Thank you.

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
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