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Will Our Second Mortgage Vanish After Our Chapter 13 Bankruptcy? – Lisa

Written by Steve Rhode

“Dear Steve,

My husband and I filed a CH13 in efforts to save our home. 2nd mortgage was stripped and court. 4 months into bankruptcy, trustee felt we could pay 100% of debt which we would be paying a lot more than what we were originally paying overall. We pulled out of BK and got a modification for our home. Credit card debt called us immediately and we charged off on those accounts.

its been almost a year since Ch13 was dismissed. We have not heard from the 2nd loan and continue to pay our first. Does the 2nd loan stay dismissed or can they still come after money and what are the statue of limitations or time?

Lisa”

Dear Lisa,

I’m not clear on exactly what happened here. If you did not get your final discharge then nothing was eliminated. When you terminate a chapter 13 bankruptcy early all the debts come back. So unless your bankruptcy attorney advised you otherwise or you live in a state that has some special rule or law it would seem your second mortgage is hovering out there. You only get legal protection from your creditors while in a bankruptcy or if the debt is discharged by the bankruptcy court.

As far as the “we charged off on those accounts” statement. That does not make sense to me either. You can’t charge off an account. A charge off is an accounting function of the creditor and has nothing to do with the collectibility of a debt. A charged off debt can still be collected.

So what exactly did you do on those debts?

As far as a definitive answer on the second mortgage you will either have to contact your bankruptcy attorney for a legal answer or contact the loan company to check on the status of your loan.

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

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About the author

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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