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Our Mortgage Was Discharged in Bankruptcy But We Want to Stay. Will Wells Fargo Modify Our Loan? – Joseph

“Dear Steve,

Filed chapter 7 and had debt, including mortgage discharged ( non reaffirmed) nov 2011. Mortgage 209000, zillow says house worth 145000 was taxed at 165000 by the county.

Hello, my mortgage was discharged via chpt 7, and we didnt reaffirm and want to stay in the house. We have fallen a month behind on the mortgage and wells fargo put us on a repayment plan. My question is; is there a chance that we can get wells fargo to modify the loan? It seems like it would be cheaper for them to mod the loan rather than foerclose. I hear it costs them an armload to foreclose and the house is underwater as is. Btw mortgage $209000 apr 5.75% worth approx 150000. Thanks


Dear Joseph,

The values are interesting but meaningless at the same time. Without a certified appraisal we really don’t know what the fair market value of the house is. Neither tax value and zillow value are the numbers that actually matter one is arbitrary for taxes and the other is a best guess based on an algorithm.

If you discharged your mortgage via a chapter 7 bankruptcy you have no mortgage and a clouded title to the property. Wells Fargo can’t modify the mortgage because it was discharged. As far as making payments, it sounds like you are essentially renting the property from the bank.

While you may currently be listed as the owner of record, the current title to the property is encumbered by the old loan which was discharged from you but not the real estate.

This is a problem many face but are simply not aware of the reality of what happens.

The bankruptcy discharge only eliminates your personal obligation to pay the debt.

You are still the legal owner of the home until the bank starts and finished the foreclosure process.

But insurance is something else to consider. Since the house is still in your name, if someone injures themself on your property, you may be sued. And since this is after the bankruptcy, it cannot protect you. – Source

It seems to me the only way you can clear up the lien against the home is to let the lender foreclose or get a new loan and pay off the discharged one.

Please post your responses and follow-up messages to me on this in the comments section below.

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About Steve Rhode

Steve Rhode
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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