“Dear Steve,
Post 2 years Chapter 7 – credit report shows discharge of mortgage. Want to stay here and pay off the house and eventually get title…
My Chapter 7 discharged unsecured debts more than 2 years ago. Unbeknownst to me it also discharged my primary residence mortgage. I have stayed current on the mortgage the entire time even though upside down still by a good amount on the house. I would like to stay here for the next 20 years, pay off the mortgage, and eventually get title/deed. Is that even possible? And what will I have to do to get title/deed since my credit report shows payments current but notes a discharge back in August 2010??
Thanks!
Greg”
Dear Greg,
Yikes. Houston, we have a problem.
What is tripping you up here is a common misperception and problem faced by others in the same situation.
It is true the chapter 7 bankruptcy discharged your personal obligation to repay the mortgage.
But, and here is the big but, the lien against the property was not eliminated. The payments you are making now to the bank, they will gladly take, but they are not going towards anything. You do not have an obligation on the property. It’s kind of like the bank is taking your payments as rent. Actually they are just taking your payments. They can kick you out any time they want to take the house back.
Right now you are living in a property that has a huge underwater lien on it. If you were to attempt to purchase the house either the bank has to take the property back in a foreclosure and strip the lien or you need to pay off the old lien which was for the value of your mortgage.
You can’t payoff a mortgage which no longer exists and you can’t get a mortgage on the property unless the old lien is removed against the title to the property.
Before you continue to make payments I would strongly suggest you find a local real estate attorney and discuss the situation with them. With their help, or maybe by yourself, you’d have to negotiate a solution with the bank, that currently owns the house, to reissue a mortgage on the lien value outstanding.
Oh, and let’s not forget, as long as the house and lien are in your name you are responsibile for the insurance and taxes as well.
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Thanks for the detailed answer Steve – the only thing is that I am seeing the balance go down. I got a tax statement last year for the interest paid and wrote it off just like usual. Everything looks right except Experian shows the mortgage discharged. I will take your advice and call my mortgage servicer and see if they will put my mortgage back on my credit report. Also the mortgage servicer recently sold the mortgage to a new servicer which does not appear on my credit report but again shows a statement with the balance going down each month…very confusing!! – Greg
Since this is such an important issue with dire financial consequences if it is not as you assume, I would suggest you invest in a consultation with a local real estate attorney to investigate your specific situation.
If your loan was included in your bankruptcy and the loan was discharged then the loan is dead unless they reaffirmed it. Of course there might be some state issue but that’s why you need to talk to an attorney.
Went Bankrupt a few years ago, House was included in chapter 7 , but still living there
Since the house was included in bankrubtcy, I have been allowed to live there paying the home equity every month. The bank would not allow me to leave it out of the bankrubtcy. ( Reaffirm debt ) Now I lost my job, can’t afford to keep up house. Do I just walk away, what would happen?