Expert: Terry Leeders - 1/16/2009

Question
Mu husband and I are thinking of filing Chapter 7.  Our 1st mortgage is 80,000 and second is 65,000.  I feel as though we have had some predatory lending done to us by our mortgage company.  We were given a 2nd mortgage based off of an illegal appraisal (which I found out a few years later) when I tried to make my interest only loan to a fixed loan and could not get my house to appraise by doing so. When I threatened bank. with the mortg company they agreed to change it.  Along with the debt I mentioned already we have approx 50,000 in unsecured debt as well.  If we file a Ch. 7, will we have to pay back the 2nd mortgage??  can we keep our home?????

We live in Ohio

Answer
Yes. Unfortunately, if you want to keep the home in Chapter 7 you will have to pay all liens, as they will remain.  There is pending legislation in Congress now that may help you down the line, but nothing has passed yet.  Your other options are to file a suit against the lender, appraiser, broker etc. for the fraud element....but that may involve you paying back the amounts taken out, as you still received the benefit of the bargain.  But who knows? if the violation was bad enough, you might have some state laws on your side. I am just speculating, as I am only licensed in Illinois. Contact a local lawyer, as well as your state's attorney's office...ours in IL are going after these guys tooth and nail, so you might have some options available. Good Luck.