Pre-foreclosure 2 lien holders

9 Replies

Hello

I could use some help.  I own a home that has 2 liens on it.  I filed bankruptcy but this house is still in my name.  Between the 2 loans there is more owed than it's worth.  I attempted to get the 2 mortgage holders to work together but the 2nd lien holder won't agree to the amount the 1st is offering to remove their interest.

Am I able to work with the 2nd lien holder to do a short sale?  I live in Oregon and could use a all the help I can get.

Thanks

Deborah

I believe the bankrupt will absolve your debt with both lenders (lien holders).

With that said you can't do a short sale unless the lender in the first position is on board.

Medium screen shot 2016 10 24 at 7.48.37 pmTodd Fox, Visum Development Group | 607‑269‑7300 | http://www.visumdevelopment.com

Yes, the bankruptcy has legally removed me from owing the debt, but the lien holders have not taken my name off the house.   I am unable to obtain a mortgage on a new house until my name is removed from the other.  

If the property was listed in the bankruptcy then I assume you have quit paying on it.  If you reaffirmed the debt then you are liable on it.  If discharged you notify the trustee and he will order them to remove you from the debt and you tender the property to the mortgage holders.  At that point the second must either drop his lien or the pay off the first mortgage.  it is possible the trustee may just tell the first lien holder he is released to foreclose the junior lien holder out.  It seems the second mortgage holder should be VERY motivated because unless he pays off the first lien his will be extinguished.  The bankruptcy trustee can force them to remove you.  Talk to your bankruptcy attorney on this.

Thank you.  I will do that.

Deborah

Originally posted by @Todd Fox :

I believe the bankrupt will absolve your debt with both lenders (lien holders).

With that said you can't do a short sale unless the lender in the first position is on board.

Being absolved of the debt, has nothing to do with the liens. The ONLY time the liens will be impacted by a bankruptcy discharge is if the borrwoer stripped the liens in a chapter 11 or 13. That means they filed a motion for a hearing, had the hearing, presented sufficient evidence at the hearing for a judge to grant their motion and remove the lien (It's a little more complicated than just removing) AFTER the competion of the plan.

Otherwise, while there is no personal liability for the liens, the liens survive and if they are not paid, the lender can foreclose.

Can you do a short sale? Sure, if all lienholders agree to participate. You can't force them to participate.

Originally posted by @Deborah Vierra :

Yes, the bankruptcy has legally removed me from owing the debt, but the lien holders have not taken my name off the house.   I am unable to obtain a mortgage on a new house until my name is removed from the other.  

So...until that happens, yes, you are correct. You will be unable to obtain a new mortgage. You can't remove your name from the title. Yeah, you can quitclaim it to some stranger but, that isn't going to work in the eyes of a lender. Foreclosure, payoff or short sale is the only way it's going to happen.

Originally posted by @Jerry W. :

If the property was listed in the bankruptcy then I assume you have quit paying on it.  If you reaffirmed the debt then you are liable on it.  If discharged you notify the trustee and he will order them to remove you from the debt and you tender the property to the mortgage holders.  At that point the second must either drop his lien or the pay off the first mortgage.  it is possible the trustee may just tell the first lien holder he is released to foreclose the junior lien holder out.  It seems the second mortgage holder should be VERY motivated because unless he pays off the first lien his will be extinguished.  The bankruptcy trustee can force them to remove you.  Talk to your bankruptcy attorney on this.

Sorry Jerry...doesn't work like that. The trustee isn't going to order anyone to remove anyone from any debt. They don't need to. The debt is already gone and, while its great in theory, people don't "Tender the property to the mortgage holders". As I mentioned, yeah, some people remove themselves from title and mail back the keys. The lender chuckles a little bit when it happens and they proceed with their foreclosure. In the absence of a payoff or a short sale, a foreclosure is the only way you divest yourself of the title issue (and some litigation!).

And...at NO point does the second lien holder have to do anything. "Drop his lien"? Not sure where you heard that but that doesn't happen. The trustee isn't going to do anything for you on this and yes, talk with your bankrupcty attorney, where they will confirm that the above suggestions are not based on how it really works.

Youre probably not going to be able to get a new mortgage if you have a bankruptcy on your record. Most traditional banks require 4 years of restored credit. FHA loans I believe are two years but you should double check with a local bank about that.

Medium screen shot 2016 10 24 at 7.48.37 pmTodd Fox, Visum Development Group | 607‑269‑7300 | http://www.visumdevelopment.com

Update

I contacted both the bankruptcy attorney and the trustee who handled the bankruptcy.  Neither of them can force the lien holders to remove my name.   The 2nd lien holder will settle with me for 10% of the balance.  The primary lien holder wants to foreclose but hasn't yet.  

If I can settle with the 2nd lien holder, there is equity in the home and I could sell it.  Can I do the two deals separate from one another or do both lien holders have to know what's going on with the other?

Deborah