Expert: Terry Leeders - 12/10/2007

Question
HI there,

My husband and I filed Bankruptcy Chpt 7 in Oct 2006.  It was discharged in Jan 2007.

Our 1st and 2nd mortgage was included in the bankruptcy, but it's still going thru foreclosure.  Is that the norm? I was under the impression (by our BK lawyer) that if the debt was incurred before the filing, that it would be discharged with the BK.  

I got a letter from the bank and they wanted us to keep hazard/fire insurance on the house still (which we haven't lived in since June of 2007); because it hasn't sold yet through foreclosure.  Are we still obligated to pay for the property insurance and/or the mortgage loan even if it was forgiven in the BK?

I am confused.  I thought that if the mortgages fell into the BK, then we would be free of debt from the house.

Are we still liable for the house and the mortgage loans?  I can't get a straight answer from anyone.

Please advise.

thank you,

Janie


Answer
Although the debt is discharged in your bankruptcy, you still own the title to your home.  In order to transfer title back to the lender, they have to go thru foreclosure.  Your debt is still discharged, however, the mortgage company will sell the property to recoup as much of the mortgage as possible thru the foreclosure sale.  This is just a way for them to transfer the title.  You do not have to pay the loans.  They will use the sale proceeds to cover the mortgages.