Expert: Terry Leeders - 11/8/2007

Question
I have read your other posts regarding no affirmation agreement with the first lien holder on our home.  We filed BK7 and were discharged in December 2003.  It states on all our first mortgage statements that "...you are not obligated to pay this debt under the BK7 and we are not attempting to revive any personal liability.......".  Can we voluntarily surrender the property back to the first lien holder?  The property is almost ready to go to the county for foreclosure proceedings.  We have a 2nd mortgage that we actually did reaffirm --- how do they play into this?  Most importantly, we have listed the property with a realtor and he is very concerned about the option that we have to actually walk away from the 1st mortgage.  His attorney doesn't think that is correct..... If it is, do we still have the right to sell the property and properly pay off the first mortgage and the second?  If that is the case, can I write to the 1st mortgage co and explain that the house is for sale, stop foreclosure proceedings because of the BK7 and offer them to sell the house for them without further collection efforts from them (save it from going to the county)?

Thank you for your response.

Answer
If you did not reaffirm, you will not be responsible for the loan.  For the second, since you did, you are on the hook for that amount. If the home forecloses, and there is a deficiency balance owed to the 2nd, then you may have to pay that.  You can always sell the property, the loans are still a lien against the property and will get paid at the sale,regardless if the debt was discharged in the bankruptcy.  The foreclosure is just the way to transfer title, so it will continue, regardless of the prior bankruptcy.