Expert: Terry Leeders - 4/15/2010

Question
QUESTION: We filed Chapter 7 bankruptcy 3 years ago (it will be discharged 3 years this June 2010). We had a second mortgage with a major bank whom, on our credit report, listed our account with them as 'included in bankruptcy', although they kept sending us monthly 'statements' with the heading on the statement to the tune of "________(bank) is not attempting to collect this debt from you; rather it is providing notice that they may legally proceed against the real estate..." If this debt was included in bankruptcy, how can they continue to attempt to come after us? It reads to me that they wrote the debt off, but they are still trying to collect on it. Any assistance is greatly appreciated. The bankruptcy attorney we used doesn't seem to have any answers for us.

ANSWER: The loan is discharged in bankruptcy if you did not reaffirm on it.
Their lien will stay on the home though, since the bankruptcy does not extinguish their security interest. So when you go to refi or sell, they will be paid the balance to clear the title.
IF the home forecloses, the balances are already discharged, so they will not be able to collect on any deficiency balance.  They are probably just sending statements to you so if you do want to pay it down yourself, you can.

---------- FOLLOW-UP ----------

QUESTION: Thank you so much for the quick reply! We did not reaffirm the loan. However, we feel as though they are pressuring us to make payments on the loan. They already tried to force us into foreclosure once before. Does this bank have any right to try to foreclose upon our house? The balance with them was $17,000 & our house is valued at $117700 by the city. I just cannot believe a bank would try to put someone out of a home for such meager interest in the house, especially when we feel we were duped by the bank from the start (they did not put it clear to us that the loan was a fixed rate, but only for the first 3 years; and then after that, at some point (which they never did clarify) a balloon payment will be due. Is there a way to get the lien removed or is this highly unlikely? Thank you again for your assistance!!!

Answer
yes, a lien holder can file, although it is usually the first mortgage that does so. If there is enough equity to go around and to cover their loan, they could though. At this point you cannot remove the lien. Unfortunately you cannot get this lien removed.  Good luck.