Expert: Mark J. Markus- California Bankruptcy Attorney - 8/13/2007

Question
My husband and I filed Chapter 7 Bankruptcy. It was discharged Sept 2005. Included in the Bankruptcy was our first and second mortgage. We have kept our house by continuing our obligations to both first and second mortgage with out any sort of agreement to do so. Our second mortgage we set up a loan to pay interest only for 10 years. We continue to pay the interest only payments. My question is if we stopped paying to the second mortgage company but continued to the first would interest accrue on the second mortgage or would we only have to pay principle upon the sale of our home to get a release of the lien from the second mortgage company.

Answer
When was the agreement set up with the second?  Was this a reaffirmation agreement filed with the bankruptcy court?   If you stop paying the second, the second can foreclose and you will be responsible to pay whatever is owed to them pursuant to your Promissory Note with them.  If you sold your home, you'd have to pay off the second, unless they agreed to a "short sale".