Expert: Mark J. Markus- California Bankruptcy Attorney - 7/23/2007

Question
QUESTION: My second mortgage of $50,000 was charged off by Chase during my Chapter 7 bankruptcy.  My first mortgage lender Countrywide allowed me to work out my first mortgage and keep my house.  Chase told me they would not require me to pay off the $50,000 because they had charged off the loan, however, they held the lien.
I was very surprised to  learn that Chase had sold the account to B & B funding, who is now trying to get all the back interest payments (now almost $10,000) plus penalties plus principle.  I had been paying them the agreed-upon $200 per month instead of the entire payment of $397 per month because I am still having financial difficulties.  I now find out they have been reporting each month as non-payment, so my credit is still very damaged.
I want to know what I can do.  Specifically; was it legal for Chase to sell the loan during a bankruptcy?  Since is was charged off, if I default and lose the house, can B & B come after me for the entire amount?  The house is now worth about $150,000 according to a real estate agent, and my first mortgage is still about $132,000.


ANSWER: "charged off" is merely a bookkeeping term and has no legal relevance.  Chase sold its loan to B&B.  Certainly nothing wrong there.  B&B has a lien against your property.  If you don't make payments as required on the underlying loan, they can foreclose.  If you need time to catch up on the payments, a Ch. 13 may be a possibility.  There may also be a possibility of suing Chase or B&B for violations of Truth in Lending Laws (as I understand it, nearly ALL lenders violte that somehow), but that's way out of my area of expertise.

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

QUESTION: Not what I had hoped to hear, but thanks for the very speedy reply.
My main question is if they foreclose, whether they can come after me for the total value of the loan, as the sale of the house will not net them near the current payoff.  I was wondering if, because it was charged off during a chapter 7 bankruptcy if I am still covered by bankruptcy protection.  Since this happened in 2004, I am not eligible for another bankruptcy.

Answer
If you owed the debt on the date your bankruptcy case was filed, then the debt was presumably discharged in your bankruptcy case, but they still have a lien against the property.  If they foreclose, you should not be liable for any deficiency amounts.  Again "charged off" is meaningless; you keep referring to that as if it means something.