Filed for Chapter 13 in 2010, converted to Chapter 7 in 2011. Did not reaffirm first or second mortgage at that time. Continued to pay first and current with it, but disregarded second falsely assuming there was nothing they could do because house is underwater. With staying current on first, house is finally at a break even point and the second mortgage, after being resold numbers of times, has filed foreclosure proceedings giving us only about 70 days to resolve the matter. Second mortgage with fees is around $34K. They said they would settle for about 85% of the total, which is not feasible – I can make payments but I do not have cash for a large down payment.
They are asking for a ton of financial information to see if we qualify for a repayment plan, which I feel they would force us to make a large lump sum payment to reinstate the loan, and we cannot do that. Do you think our first mortgage company would offer to refinance, do you think we should file chapter 13, which I really do not want to do, but we do want to keep our house.
I asked Chad Van Horn, an attorney in Florida, for some words of wisdom. Here is what he had to say about your situation.
“I’m sorry to hear about your situation and it seems as though a Chapter “20” may be your best option. That is the Chapter 7 wipes out your personal liability and the Chapter 13 strips away the liens. You need to be careful however as you can only strip a lien if your first mortgage exceeds the value of your house. 85% seems like a very steep offer as we usually settle these 2nd liens for much less. You may also want to speak with a consumer attorney to see if the lender violated any consumer laws and use the potential suit as leverage to receive a better settlement.
In short, you have options to save your home. I hope it works out!”
I agree with Chad that the combination approach is what a lot of people do.
If you want to stop the foreclosure and strip the second mortgage lien from your home you should talk to a licensed bankruptcy attorney in your state about the benefits of a new Chapter 13 bankruptcy.
Get yourself to a bankruptcy attorney immediately. The debt may be able to be settled with help from the attorney as well if the lender is faced with recovering nothing through a Chapter 13 bankruptcy.