Expert: Terry Leeders - 4/7/2009

Question
I filed for Chapter 7 Bankruptcy in July 2008 and it was discharged in the first week of November 2008.  My BK was pretty uneventful and went pretty smoothly.

During the bankruptcy, I kept my mortgage payments current but did not sign a re-affirmation agreement for either the 1st or 2nd mortgage I have on my home because I am underwater by $70,000 thanks to a poor online valuation originally used to value my home by the 2nd mortgage company.  

Since my discharge, I have been trying to get a principle reduction mortgage modification due to the large amount I am underwater to no avail.  The mortgage company advised me to pay the entire amount per my contract or they will foreclose.  

Since the mortgage company would not agree to a modification, I stopped making my mortgage payments, effective December 08, since both mortgage loans were discharged by the BK court and so the mortgage company can just foreclose and take the home so I can get on with my life.

My questions are since both the 1st and 2nd mortgage loans were never re-affirmed with the BK court, am I liable for the remaining debt once the mortgage company forecloses?  Is it possible I can re-open my Chapter 7 case and request they drop the lien to my 2nd mortgage due to large amount of underwater negative equity and allow me to become current on the 1st mortgage?

Something keeps telling me my attorney should have addressed this during the BK but maybe not.

Answer
If you did not reaffirm (or refinance after the bankruptcy) you can walk away from the debt, let them foreclose, and not owe another dime to the mortgage company since the debt is discharged without a reaffirmation agreement on file.  It is sometimes possible to strip off a second mortgage, but only if it is wholly unsecured.  If there is $1 in value to attach to, it will survive.  You would also draw objections from the lender, who may fight your valuation etc.