Second Mortgage

Is it possible to remove a second mortgage lien after a bankruptcy?

Say that you have filed for bankruptcy, and put your house on it as well and a second mortgage too. Now you decide to sell your home and you get hold of the second mortgage lien holders to get the pay off. On the top of that you come to know that your first mortgage lender wants all of his equity he can get. So how do you deal with such situation?

If your house is worth more than what you owe, your mortgage lender will allow you time to sell the house and keep any profit after what is owed. It will be smart to sell the house to a friend as liens follow the property not the original holder. There is a possibility that your mortgage lender will most likely offer a lesser amount to the new lien holder — the amount owed minus interest.

Also, before you get into such situation, you could have appraised the house back when you filed for bankruptcy. If your first mortgage was higher than the amount the house was worth, you could have filed a POND motion to have the second mortgage wiped out.

Since you or your attorney did not do this, you still owe the second mortgage because mortgages are considered secured debts, and are secured by the value of your home. If you don’t pay them, they can foreclose. I’m surprised that The Money Store didn’t foreclose since you weren’t making payments to them, even though you were paying the first mortgage.

Moreover you must note that if you sell the house, you have to pay the amount that the first mortgage is owed and the amount that the second mortgage is owed. You also owe the accumulated interest and late fees due to the second mortgage.

Well, if your house doesn’t sell for enough to pay off both mortgages, you’ll still owe the amount over the value that the house sells for.