Expert: Terry Leeders - 2/13/2008

Question
I am a mortgage broker who’s company recently went under. I am now working for a debt consolidation company and not making nearly the amount of income as I was before. I have been speaking to many attorney’s, reading a lot of books and constantly on the internet. I keep getting different information everywhere I go. I am scared I am going to lose my house. The current value is $220,000. My house has been on the market for the past 6 months trying to do a short sale with no luck. My first mortgage is for $249,000 and second for $125,000 which totals 374,000. I live in FL…….and the market crashed.

If I file for a ch 7 and reaffirm just my 1st mortgage do I need to be current on my 2nd mortgage when I file as well? One of the attorney’s I spoke to said I would have to be current on both. This doesn’t make sense to me because I wouldn’t be filing bankruptcy if I could afford both mortgages. Why do I need to be current on the 2nd mortgage when I am filing bankruptcy to get rid of it? PLEASE HELP  

Answer
Hi Jen.
Normally, both liens stay on your home. You should discuss with your lawyer the possibility of stripping off the 2nd mortgage.  Each state laws are different, but if the loan is wholly unsecured, (meaning there is no value for the lien to attach to, then the court might be able to order the loan to be stripped off completely and discharged thru your case.  Normally, if you wish to keep a home in chapter 7, you need to make the payments and stay current on all mortgages.