What can 2nd lien holder do after Chapter 7?

[mquinnemmy]

What is the name of your state (only U.S. law)? Illinois

My ex & I filed chapter 7 in 1998, shortly after I filed for divorce. Ex failed to appear at court hearings so both went thru by default without him. I was awarded the house thru divorce. After bankruptcy I stopped paying 2nd mortgage - I knew that as 2nd lien holder they could only collect upon the sale of my home.

Recently I did a loan mod on 1st mortgage to avoid foreclosure. My ex has no interest in the property so he signed a quit claim deed so the loan mod did not require his signature, but his name is still on the loan. Now at age 52 I'm back to a 30 yr $90K mortgage, which is the value of my home since it needs so many repairs.

Now I'm in a financial position to start making those repairs so I build equity & sell, but what is the 2nd lien holder entitled to upon sale - are they only able to collect the principle amount borrowed, or are they entitled to that plus all missed interest & and late fees?

I've read it's possible that 2nd mortgage "charged off" the debt & has no lien - how can I find out if that happened?

If the lien is there - can I settle with the 2nd mortgage for a lessor amount to remove it - or file Chapter 13 to do a "lien strip" before improving my home? If so, is the lien only removed for me and not my ex since his name still is on their loan documents? Does the quit claim deed play a part in this area?

Should I walk away from this house, let the 1st & 2nd have their money, and just buy a cheap foreclosure home to fix up? This would eliminate the 2nd lien holder snag and get my ex completely out of the picture. I can buy a cheap foreclosure for about $45K in my area and will have the money do so without a mortgage in a few months.

 

[HomeGuru]

What is the name of your state (only U.S. law)? Illinois

My ex & I filed chapter 7 in 1998, shortly after I filed for divorce. Ex failed to appear at court hearings so both went thru by default without him. I was awarded the house thru divorce. After bankruptcy I stopped paying 2nd mortgage - I knew that as 2nd lien holder they could only collect upon the sale of my home.

Recently I did a loan mod on 1st mortgage to avoid foreclosure. My ex has no interest in the property so he signed a quit claim deed so the loan mod did not require his signature, but his name is still on the loan. Now at age 52 I'm back to a 30 yr $90K mortgage, which is the value of my home since it needs so many repairs.

Now I'm in a financial position to start making those repairs so I build equity & sell, but what is the 2nd lien holder entitled to upon sale - are they only able to collect the principle amount borrowed, or are they entitled to that plus all missed interest & and late fees?

I've read it's possible that 2nd mortgage "charged off" the debt & has no lien - how can I find out if that happened?

If the lien is there - can I settle with the 2nd mortgage for a lessor amount to remove it - or file Chapter 13 to do a "lien strip" before improving my home? If so, is the lien only removed for me and not my ex since his name still is on their loan documents? Does the quit claim deed play a part in this area?

Should I walk away from this house, let the 1st & 2nd have their money, and just buy a cheap foreclosure home to fix up? This would eliminate the 2nd lien holder snag and get my ex completely out of the picture. I can buy a cheap foreclosure for about $45K in my area and will have the money do so without a mortgage in a few months.

**A: you really need to be communicating with the lenders; especially the second.

 

[Ohiogal]

What is the name of your state (only U.S. law)? Illinois

My ex & I filed chapter 7 in 1998, shortly after I filed for divorce. Ex failed to appear at court hearings so both went thru by default without him. I was awarded the house thru divorce. After bankruptcy I stopped paying 2nd mortgage - I knew that as 2nd lien holder they could only collect upon the sale of my home.

Recently I did a loan mod on 1st mortgage to avoid foreclosure. My ex has no interest in the property so he signed a quit claim deed so the loan mod did not require his signature, but his name is still on the loan. Now at age 52 I'm back to a 30 yr $90K mortgage, which is the value of my home since it needs so many repairs.

Now I'm in a financial position to start making those repairs so I build equity & sell, but what is the 2nd lien holder entitled to upon sale - are they only able to collect the principle amount borrowed, or are they entitled to that plus all missed interest & and late fees?

I've read it's possible that 2nd mortgage "charged off" the debt & has no lien - how can I find out if that happened?

If the lien is there - can I settle with the 2nd mortgage for a lessor amount to remove it - or file Chapter 13 to do a "lien strip" before improving my home? If so, is the lien only removed for me and not my ex since his name still is on their loan documents? Does the quit claim deed play a part in this area?

Should I walk away from this house, let the 1st & 2nd have their money, and just buy a cheap foreclosure home to fix up? This would eliminate the 2nd lien holder snag and get my ex completely out of the picture. I can buy a cheap foreclosure for about $45K in my area and will have the money do so without a mortgage in a few months.

Get out your divorce paperwork and see what it states regarding the home. Most likely you need to hold your ex harmless on the house. If you don't do that, your ex can take you to court on a motion to show cause and you could end up owing him money due to your destruction of his credit. How did you do a loan modification and he still remains on the loan if he didn't sign anything?

 

[HomeGuru]

I don't think we were given all the facts Ohiogal.

 

[Ohiogal]

I don't think we were given all the facts Ohiogal.

I concur with you.

 

[mquinnemmy]

Get out your divorce paperwork and see what it states regarding the home. Most likely you need to hold your ex harmless on the house. If you don't do that, your ex can take you to court on a motion to show cause and you could end up owing him money due to your destruction of his credit. How did you do a loan modification and he still remains on the loan if he didn't sign anything?

My lender (Wells Fargo) said the quit claim deed just removes his interest in the property, and because I had it the loan mod did not require his signature. They said his name remains on the loan documents until I refinance in my name only. They said a loan modification is not a "refinance".

Our divorce decree is very vague - only 3 pages. I went to court for what my attorney said was a "prove up" and the judge became angry that my ex failed to show up to court yet again so he unexpectedly put the divorce through that day by default. The decree states I am awarded the house & should refinance it in my name when I am able to. It also says my ex is to split the 2nd mortgage payment with me but he never did. I could barely get my ex to pay child support so I never pushed the 2nd mortgage payments. Because of the bankruptcy, job loss, lack of child support (ex has been unemployed off and on due to health issues) and some expensive health care issues for my daughter (another thing I never got help with from my ex) I have poor credit and am unable to refinance in my name.

I knew I was riding on borrowed time and would have to deal with the 2nd mortgage eventually - now I'm trying to figure out what's the best way to deal with it.

 

[mquinnemmy]

I concur with you.

I'm not really sure what facts you think are missing? Can you please explain?

 

[mquinnemmy]

I don't think we were given all the facts Ohiogal.

I'm not sure what facts you think are missing? Can you please explain?

 

[tranquility]

Recently I did a loan mod on 1st mortgage to avoid foreclosure.

What were the modification terms? If the modification "substantially impairs or prejudices the junior lienor" and permission from the second was not obtained, the formerly "second" lien may have moved to become the primary. I would guess that the mod is larger than the second and you would not have a chance to strip it in BK.

 

[mquinnemmy]

What were the modification terms? If the modification "substantially impairs or prejudices the junior lienor" and permission from the second was not obtained, the formerly "second" lien may have moved to become the primary. I would guess that the mod is larger than the second and you would not have a chance to strip it in BK.

We borrowed 25k on 2nd mortgage. The loan mod basically gave me a lower interest rate, added past due payments back in the principle due, and is for 30 years...the principle due is 90k. I'm not sure i understand your answer, but it sounds like you think I'm trying to lien strip the 1st mortgage.....I know I can't do that. I'm trying to figure out what the 2nd can do so I can be prepared and know what options I might have. In looking on the Internet I came across some information about lien stripping a 2nd mortgage after a bankruptcy.

 

[LdiJ]

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We borrowed 25k on 2nd mortgage. The loan mod basically gave me a lower interest rate, added past due payments back in the principle due, and is for 30 years...the principle due is 90k. I'm not sure i understand your answer, but it sounds like you think I'm trying to lien strip the 1st mortgage.....I know I can't do that. I'm trying to figure out what the 2nd can do so I can be prepared and know what options I might have. In looking on the Internet I came across some information about lien stripping a 2nd mortgage after a bankruptcy.

Do a google search on Mortgage debt forgiveness...you will find some interesting information.

 

[justalayman]

mquinnemmy;3159036]My lender (Wells Fargo) said the quit claim deed just removes his interest in the property, and because I had it the loan mod did not require his signature. They said his name remains on the loan documents until I refinance in my name only. They said a loan modification is not a "refinance".

yes but a new contract or novation of the existing contract does. If it affected his liabilities, he needed to sign something. Since you increased the amount HE owes, how you got this through without his signature is beyond me.

 

[mquinnemmy]

yes but a new contract or novation of the existing contract does. If it affected his liabilities, he needed to sign something. Since you increased the amount HE owes, how you got this through without his signature is beyond me.

I'm really confused now. Wells Fargo told me in order to not have ex sign loan mod papers I had to provide my divorce decree which said I was awarded the house and get him to sign quit claim deed. My ex knew what was going on and was happy to sign quit claim deed. I was surprised his name was on the loan docs too, but page one said all parties must sign unless divorce decree or quit claim deed was provided. I questioned it with Wells Fargo and they assured me everything was in order, and said only a refinance in my name only would get ex off loan docs, I would never be approved for an affordable refinance on my own.

Now I'm concerned....do you think Wells Fargo did something wrong here by keeping ex on loan docs but not requiring him to sign?

 

[justalayman]

Now I'm concerned....do you think Wells Fargo did something wrong here by keeping ex on loan docs but not requiring him to sign?

Yep. You have somehow committed the ex to whatever terms and debt the new contract is for. Just how do you suggest you could alter his financial liabilities without his agreement?

hint: you can't, at least and bind him to them.

Just out of curiosity, in the bankruptcy, were the loans secured by the home discharged or reaffirmed?

 

[mquinnemmy]

Yep. You have somehow committed the ex to whatever terms and debt the new contract is for. Just how do you suggest you could alter his financial liabilities without his agreement?

hint: you can't, at least and bind him to them.

Just out of curiosity, in the bankruptcy, were the loans secured by the home discharged or reaffirmed?

Initially after the bankruptcy I tried to work with the 2nd, but they kept saying "you don't own the debt anymore and any payments you make are voluntary". I never reaffirmed that debt. Whenever I call Wells Fargo I have to listen to their discharged bankruptcy notice and they say the same thing...my payments are voluntary and if i dont pay they will only exercise their rights against the property.

I thought the bankruptcy meant we could keep our home if we payed the mortgage.....if we stopped paying they could foreclose of course, but they couldn't turn around and sue us for extra money lost in the foreclosure process due to the bankruptcy.