What Should I Do About My Old Defaulted Second Mortgage?


Dear Steve,

In 2009 I took out a 2nd mortgage on my property to pay off debt. Six months afterward I lost my job and couldn’t make my payments.

I filed Chapter 13 bankruptcy in 2011 in order to save my home. My case was not discharged because I failed to submit my tax refund.

I was 90% done with my payment plan. I was notified that my case was dismissed not discharged. So my 2nd loan which would have been extinguished wasn’t. I just received a notice saying that my loan servicing was being transferred to another servicer.

I haven’t made a payment on the second since 2009. I’m current on my first mortgage.

Is there recourse on my loan since it has been so long? I just want to stay in my home. I have been here for 20 years and my wife has a lot of stuff. (Lol) I have enough equity to pay the 2nd but I wouldn’t have any money left to move elsewhere. My notice says this on the bottom, “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, and we will not report it to any credit reporting agency.”

Any advice for an older gentleman not wishing to fall down this rabbit hole?



Dear Frank,

Thank you so much for submitting your question for me to answer.

While the second mortgage may be past the statute of limitations to sue you over, the primary issue is that the lien on the property will remain until it is satisfied.

You won’t be able to sell the house and get a clean title to transfer unless the mortgage is repaid.

In Chapter 13 bankruptcy, there is a possibility to strip part of a second mortgage but the balance on the mortgages would have to be more than the value of the property. It does not sound like that is the case.

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If the Chapter 13 approach sounds like something you want to try, I would suggest you talk to a bankruptcy attorney. You can file a Chapter 13 bankruptcy again.

Otherwise, the second mortgage is going to just sit there, with the balance growing.

But wait, there’s more. Actually there are a lot more second mortgage posts you might want to read.

One of those posts is Why It Makes Sense to Consider Debt Settlement for Second Mortgages and HELOCs.

You might decide to get some professional assistance to negotiate a settlement of the second mortgage for less than the current balance. While a settlement has some cons like a mark on your credit report but you already have one from the defaulted second mortgage and the lien on the property. Additionally, you might owe income tax on the forgiven debt with the settlement. However, it would completely eliminate the second mortgage from the property for less than the current balance that is actually owed on the lingering second mortgage.


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Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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