Do I have the right for the exess funds after bankruptcy and foreclosure? 16 Answers as of January 27, 2014

Bankruptcy chapter 7 was filed in 2010 and was done on January 2011. Foreclosure by first TD on July 2011. 2nd was a non-purchase money 2nd written off in bankruptcy which makes them a creditor against me personally. However if the bankruptcy was finalized prior to the foreclosure, they can not sue me or collect the debt. Who gets the excess funds?

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Stuart P Gelberg
Stuart P Gelberg | Stuart P Gelberg
The bank's lien survived the bkry and they would be entitled to any surplus before you.
Answer Applies to: New York
Replied: 1/27/2014
Stephens Gourley & Bywater | David A. Stephens
The second will if it is properly recorded. If not, the funds will come to you unless the trustee has claimed them.
Answer Applies to: Nevada
Replied: 1/24/2014
GARCIA & GONZALES, P.C. | Richard N. Gonzales
The homeowner, which I assume is you.
Answer Applies to: Colorado
Replied: 1/23/2014
Tokarska Law Center
Tokarska Law Center | Kathryn U. Tokarska
The bankruptcy discharged the debt as to you personally so you are right in that the second note holder cannot collect against you personally, UNLESS you reaffirmed the loan in your bankruptcy. However the bankruptcy likely did not remove the lien that the second note holder has against the property itself. Even if the debt was written off the deed of trust the second holds on the property remains and the deed holder is entitled to any excess funds up to the balance on that note. If the combined balance of the first and second loan exceeds the proceeds of sale (sale price minus costs of sale) you get nothing.
Answer Applies to: California
Replied: 1/23/2014
Patrick W. Currin, Attorney at Law | Patrick Currin
I would say that the appreciation occurred after the closure of the case and you are entitled to the funds.
Answer Applies to: California
Replied: 1/23/2014
    Law Office of Lynnmarie A. Johnson
    Law Office of Lynnmarie A. Johnson | Lynnmarie Johnson
    Generally excess funds would be divided among the creditors, but I don't understand why you would have excess funds from a 2nd mortgage being written off by the mortgage company. If you discharged it in the bankruptcy, the 2nd mortgage should be entitled to keep any money they had collected to that date or after until the foreclosure took place. Some piece of information is missing. Sorry I couldn't be more specific.
    Answer Applies to: Michigan
    Replied: 1/23/2014
    Meister & McCracken Law Firm, PLLC | Joanne M. McCracken
    That is a question for your bankruptcy attorney. Your attorney knows the facts of your case and what exemptions you claimed.
    Answer Applies to: Arkansas
    Replied: 1/23/2014
    Steele, George, Schofield & Ramos, LLP
    Steele, George, Schofield & Ramos, LLP | Alan E. Ramos
    Assuming that this was a non-judicial foreclosure, there are no excess funds. When a senior lender forecloses on real property, they take the real property and all of its value (or lack thereof).
    Answer Applies to: California
    Replied: 1/23/2014
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    Only the debt was discharged in the foreclosure. The second mortgage was still a secured creditor and is entitled to the surplus money.
    Answer Applies to: New York
    Replied: 1/23/2014
    Law Office of Mark B. French
    Law Office of Mark B. French | Mark B. French
    If you used an attorney for your case you should consult with them as they will be most familiar with the law in your state. Since you said that you were in a Chapter 7 Case, I think you are saying that you reaffirmed the 1st Mortgage but not the second. Thus your personal liability on the Second Mortgage was extinguished when you got your discharge. Our Courts do not allow "lien stripping" in Chapter 7 cases, but perhaps yours do. If I understand your issue correctly, then even though you discharged your personal liability on the 2nd lien, the mortgage remained against the property. Thus the 2nd lien holder would be entitled to the funds (up to the amount of their debt) after the 1st lien was paid.
    Answer Applies to: Texas
    Replied: 1/23/2014
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    While the debt is discharged in bankruptcy, the lien on the real property is not affected by the bankruptcy filing. Being a lien holder with a security interest in the real property with a recorded Deed Of Trust, and not as a creditor, the second Deed Of Trust holder become entitled to the funds until the amount due to it is paid. Only then would you be entitled to any amount.
    Answer Applies to: California
    Replied: 1/23/2014
    Garner Law Office
    Garner Law Office | Daniel Garner
    You are eligible to receive any "excess funds" up to the amount of the homestead exemption you qualified for on the date you filed bankruptcy. The Chapter 7 trustee would expect you to pay the bankruptcy court anything in excess of your homestead exemption.
    Answer Applies to: Oregon
    Replied: 1/23/2014
    Deborah F Bowinski, Attorney & Counselor at Law | Debby Bowinski
    Your question isn't making sense. If your home was foreclosed then there is no excess. The foreclosing lender most likely made the highest bid at foreclosure and ended up owning the property or, if there was sufficient value, the second lien holder may have purchased the property at foreclosure. Whomever the new owner was, you no longer hold any ownership interest in the property and neither lien holder can collect any deficiency balance from you assuming you listed the debts properly in your bankruptcy case and assuming you received your discharge.
    Answer Applies to: Colorado
    Replied: 1/23/2014
    Wellman Law LLC
    Wellman Law LLC | Keith A. Wellman
    A Chapter 7 discharge does the opposite of the statement in this fact pattern. A Chapter 7 discharge applies to the person who filed the petition, not the lien created by a loan. Judgment liens can be avoided by Motion in Chapter 7 to the extent they impair the homestead exemption, but a loan secured by real estate at the time of the loan is not a judgment lien and it survives the Bankruptcy. That appears to be the case here. Unless there are some facts missing here, the next entity in line for foreclosure sale proceeds is this second lien holder. Once they are paid (and any other lien holders including judgment lien holders not avoided in the bankruptcy) then the owner would receive funds. As a side note, a second mortgage can be extinguished in a Chapter 13 if the value of the home is less than what is owed on the first mortgage (referred to as "lien stripping"), but it must be done through Chapter 13 and requires an Adversary Proceeding or at least a Motion and it requires completion of the Chapter 13 plan. I would also note that the term "written off" refers to an accounting practice by a creditor where they take a loss on their taxes on bad debt. It does not mean the debt is no longer collectible by anyone and it is not the same as a bankruptcy discharge. I would also like to point out that it does not matter when the Bankruptcy case was "finalized" (whether that is meant to refer to when the discharge is ordered, or the case closed etc.) as to whether the debtor can be sued personally. As soon as a Bankruptcy case is filed a debtor is protected from collection actions including lawsuits against them personally (absent a few exceptions based on the nature of the debt such as damages related to a DUI, fraud, recent taxes).
    Answer Applies to: Kansas
    Replied: 1/22/2014
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    That second had a secured interest in the house. They get paid on their secured claim. They get the excess.
    Answer Applies to: California
    Replied: 1/22/2014
    Westgate Law
    Westgate Law | Justin Harelik
    the 2nd lien was not wiped out with the bankruptcy. That lien still exists against the property. You aren't liable to pay on it anymore, but that does not mean the 2nd loses its position. The 2nd would get paid before you.
    Answer Applies to: California
    Replied: 1/22/2014
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