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My Second Mortgage Loan Was Charged Off. Do I Need to Worry About It? – Michelle

I apologize in advance for the short response. I am currently away on vacation with limited internet but wanted to give you an answer as soon as possible. Steve


“Dear Steve,

I have a 1st and 2nd on my home. The first loan with Chase is 315K and was modified from 7.25 to 4.25. I have since lost my job after 6 years and now on unemployment. My 2nd loan is for 100,000 and I could not pay it. It is now charged off. The 2nd loan was sold to a collection agency and I have let them know that I cannot pay them but I pay the 1st loan and that is all I can afford with unemployment. Should I file for bankruptcy or can the 2nd loan do anything to me even though my obligation is to the 1st loan first?

Should I file for bankruptcy or can the 2nd loan do anything to me even though my obligation is to the 1st loan first?


Dear Michelle,

Well right now you are sitting in the middle. The second loan may have “charged off” but that does not mean that it is anywhere near gone. I would suspect that the second loan was secured by the property and a lien still exists on your home. You would not be able to sell the house without clearing that lien.

It sounds like the second mortgage company sold your loan on to a bad debt buyer. Collection activity will begin again but probably tougher this time.

The owner of the loan can always foreclose on you if they wanted to pay off the first loan. You are not out of the woods on this, just in a small clearing.

You should go and talk to a local bankruptcy attorney and come up with a plan to address this situation. It might feel like it is resolved, its not.

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.


  • Homeowners at the end of their rope with too many debts to pay off may turn to a bad credit debt consolidation mortgage, which consolidates all their debts into one payment — the mortgage payment. Through a bad credit debt consolidation mortgage, other loans are paid off by the mortgage company, and the homeowner makes repayments to the mortgage company. Although this may be beneficial for some who face a cash crunch, there are two disadvantages of a bad credit debt consolidation mortgage to consider.

  • These are rough times. Most people are having difficulty in making a payment on mortgages. I agree with your advice, to contact a local bankruptcy lawyer for options.

    • I have a questions my second mortgage got charge off, I had try to negociate a settlement, I received a letter from the lender saying that my accoun is in a aceleration status and they demand a payment of 14,000 what is this mean?

      Thank you for any help.

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