Would We Be Better Off Now Worrying About Our Second Mortgage? – Justin

“Dear Steve,

I’ve been to my 3rd lawyer about BK. This is the one I used 10 yrs ago for my 1st BK. His fee is $2800 for a chap 7, $1k to retain him. I asked him if it would be better w/chap 13 since than I can get rid of my 1st mortg. as well. He seemed to think that it would be more costly that way and if I stopped paying my 2nd, they wouldn’t foreclose anyway, because in order to do so they would have to pay off the 1st at $160k just to get their $25k. What are your feelings on this and does it make any sense?

Can I ignore my 2nd mortgage when filing chap 7?


Dear Justin,

Hum, interesting question.

I suppose you could ignore the second to address the current issues. So technically the answer is probably yes.

But I did want to share my gut reaction to this strategy, yuck.

Maybe it is just me, I prefer solutions that address the issue at hand and allow someone to move on afterwards. With this approach it seems like you’d address a lot of your other debt concerns but you’d have this second mortgage, now in default, hanging out there waiting for you. I don’t know about you, but just knowing that liability was out there would leave me wondering when that shoe would drop.

Please update me on your progress by

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15 thoughts on “Would We Be Better Off Now Worrying About Our Second Mortgage? – Justin”

  1. The bank charge off my 2nd with out notifing me,I was in the process of modifing the loan,they told me that i could not modify the loan,I had been advised that i could modify,the bank has ruined my credit by charging it off,we have not come to terms on how to pay down the.

  2. Steve, I’ve narrowed it down to 2 lawyers, 1 chap 7, the other chap 13. Chap 7 is $1000 to retain and $2800 total with all my debt wiped except my 2nd mortgage. Chap 13 is $500 to retain, $1700 to finish and the rest of fees spread out thru 3-5 yrs of bankruptcy and my 2nd mortgage gets wiped as well as all other debt. First lawyer says don’t skip mortgage if I want to keep house, just withdraw from 401k to pay. Second says skip 2nd mortgage to pay since it will go away anyway, don’t touch 401k. My wife is stressed to the max with collector calls and homeschooling our 8 kids at the same time. I’m leaning towards chap 13.
    Any thoughts?

  3. Yes, my insurance/taxes are all in my 1st mortgage payment. I’m thinking the bank might not have such a problem, like you said Steve, but the insurance worries me. I’m getting in contact with the last lawyer I spoke with to see what he advises.

  4. I think what Justin is saying is that he has an impound account for his insurance and possible property taxes connected to his first mortgage. While this is a valid concern to be discussed with a local bankruptcy attorney, the lender would also have the option to place “forced” insurance to protect their security interest in the collateral.
    .-= Carl Starrett´s last blog ..Beware of Phony Payday Loan Debt Collectors =-.

  5. Also, thinking if I skip mortgage payments (which include insurance & taxes)than my insurance company may drop me….hate being between a rock and a hard place.

    • Justin,

      I really don’t think they’d drop you. This is probably one of the best times to miss payments, the mortgage companies are so buried they are not in a rush to do anything. Of course you’d make up these payments in the bankruptcy so they will get current again.



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