If we chose to sell to pay off first mortgage any profit above that price, would we be forced to pay that to second mortgage? 19 Answers as of January 26, 2015

I declared bankruptcy 5 years ago. I never reaffirmed first or second mortgage. House is under water. Would we be able to keep the limited profit to purchase or rent another home as well as had a foreclosure loan that was discharged in this bankruptcy? Do we need to pay that off with this sale?

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GARCIA & GONZALES, P.C.
GARCIA & GONZALES, P.C. | Richard N. Gonzales
Lien survives BK filing. 2nd mortgage would have to be paid.
Answer Applies to: Colorado
Replied: 1/26/2015
EDWARD P RUSSELL | EDWARD P RUSSELL
Since you did not sign and file a reaffirmation agreement for either mortgage those debts have been discharged in the bankruptcy. However, liens survive a bankruptcy so that when the house is sold both liens would have to be satisfied before any funds would be released to you.? If you have the second mortgage lien stripped in the bankruptcy then it would not exist anymore but that does not appear to have happened.
Answer Applies to: Minnesota
Replied: 1/26/2015
Law Office of William Stoddard | William Stoddard
Your question is based on wrong assumptions. If the house is not worth what the first mortgage is, (under water) then abandonment is an option. If the two loans make it underwater, well that is a different matter. But first the bankruptcy issue it did nothing to this situation if you continued to live in the property and make payments. This was basically affirmation by action and no declaration in the bankruptcy was necessary. So the bankruptcy filing matters not at all. There is no profit in this property, whether you are upside down on the mortgage or the mortgage and second. your obligation on the second makes it so you will get nothing if you sell to clear the mortgage, assuming you could sell.? The question you are raising is what is called a short sale. If you could find a buyer would propose to buy your house, you take the sale offer to the two lenders and ask will you both approve this. Many banks are open to this as they would rather not have you stop paying and leave them to find a buyer after a foreclosure or a deed in lieu of foreclosure. So depending on your facts, you can get on with your life if you want. Hopefully this answer has clarified things.
Answer Applies to: Washington
Replied: 1/23/2015
Law Office of Michael Johnson
Law Office of Michael Johnson | Michael Johnson
If you did not strip the 2nd mortgage you will be required to deal with them when you sell your home. No one will buy the home without a release of the 2nd.
Answer Applies to: Florida
Replied: 1/23/2015
The Law Office of Darren Aronow, PC
The Law Office of Darren Aronow, PC | Darren Aronow
Yes, just because the debt was discharged does not mean the lien has been removed from either the first or second. They would both have to be paid in order to sell the house. If it is a short sale (sell for less then what the house is worth) then you may qualify for a $10,000 cash incentive from the government.
Answer Applies to: New York
Replied: 1/23/2015
    John W. Lee, PC
    John W. Lee, PC | Timothy R. Douglass
    Yes, you will be required to pay the second mortgage in order to sell the property, however any foreclosure deficiency will likely not need to be paid. The discharge in the bankruptcy may have terminated your personal obligation to repay the debt, but it did not extinguish the liens. This is true even though you did not reaffirm the loans. Reaffirmation simply restores your personal obligation to repay the debt. Liens are the legal right for a creditor to collect repayment of a debt from a particular piece of property even if the person who owes the debt stops paying or discharges his obligation to repay. This means that the property cannot be sold unless the creditor is either paid in full or has agreed to take less than what is owed to release the lien (think short sale). I have to presume that the foreclosure you referenced was regarding a different piece of property. The lien for that debt is now gone because the bank already sold the property.
    Answer Applies to: Virginia
    Replied: 1/23/2015
    Richard B. Jacobson & Associates, LLC | Richard B. Jacobson
    Not clear from the information you provide. If house is under water, you will not collect anything. Consult your bankruptcy lawyer with all details.
    Answer Applies to: Wisconsin
    Replied: 1/23/2015
    Ronald K. Nims LLC | Ronald K. Nims
    Probably not. When you don't reaffirm on a mortgage that means you are no longer personally liable but the lender still has a lien on the house. If you haven't paid on it for five years, the interest and late payment penalties will be a huge amount. In order to sell this house, you'll need to have both the first and second mortgage lender release their liens. Generally, before they will do a "short sale", you'll have to list the house for at least 3 months and it's very unusual for the borrower to get money in a short sale.
    Answer Applies to: Ohio
    Replied: 1/23/2015
    John W. Lee, PC
    John W. Lee, PC | Kim A. Lewis
    Although your personal obligation to pay the mortgages was discharged in your bankruptcy there are still liens against your property. Unfortunately you cannot sell the property without paying off both mortgages unless the mortgage companies agree to a "short sale".
    Answer Applies to: Virginia
    Replied: 1/23/2015
    Garner Law Office
    Garner Law Office | Daniel Garner
    Typically the second mortgage holder has a lien on your property and will get whatever is left over after the first is paid off. The title company handling the sale will make sure liens are taken care of before the seller gets anything. The benefit you got from the bankruptcy is that you cannot be held responsible for whatever deficiency is left on the second mortgage after they get what they can from the sale proceeds. A bankruptcy typically does not remove a lien from property without a separate motion during your bankruptcy case.
    Answer Applies to: Oregon
    Replied: 1/23/2015
    Stephens Gourley & Bywater | David A. Stephens
    The discharge discharged you personally, but unless the second released its secured claim to the property the excess proceeds would go to the second. Sometimes you can negotiate with them.
    Answer Applies to: Nevada
    Replied: 1/23/2015
    Law Offices of John W. Lee, PC | Shanna Courtney Harris
    You must pay off all liens against the property before you can sell a clear title to someone else. This means either that the sale price needs to be sufficient to cover all liens. For property that was foreclosed upon, and the deficiency balance was discharged in bankruptcy, then you do not need to repay that discharged debt before seeking to purchase a new home.
    Answer Applies to: Virginia
    Replied: 1/23/2015
    Goldsmith & Guymon
    Goldsmith & Guymon | Marjorie Guymon
    You will be unable to sell without dealing with the second since the bk did not strip the lien against the house. You will have to try for a short sale and the terms will most likely include that you receive nothing from the sale.
    Answer Applies to: Nevada
    Replied: 1/23/2015
    John W. Lee, P.C.
    John W. Lee, P.C. | John W. Lee
    The second mortgage has a lien against the house. The vast majority of liens are not stripped off in bankruptcy. When you go to closing the closing agent will be compelled by law to pay the second mortgage from the proceeds of the sale. The fact that you did not reaffirm the debt simply means that the lenders can not come after you personally after a short sale or foreclosure. Unless there was a lien strip in your bankruptcy (which there was probably not) you will pay the second mortgage a closing.
    Answer Applies to: Virginia
    Replied: 1/23/2015
    Eranthe Law Firm
    Eranthe Law Firm | Cate Eranthe
    You say the house is underwater. If that is the case then there is no profit! Your equity (profit would come out of equity) is defined as the property value less any liens. If the mortgages are recorded (which they should be) then they are liens against the property and will be paid out of a sale. If you owe property taxes they will be first in line ahead of your mortgages. If you sell for less than the value of the liens then there is no profit and no money will go to you. Because you didn't reaffirm, you won't be personally liable for any amounts that may not be paid from the sale. The most the mortgage holders can get is what the property is sold for even if its not enough to pay them all. Mortgages, property taxes, home owners dues, and some other items are all liens against the property. You have discharged all personal liability in the bankruptcy but the liens survive and must be paid from a sale if possible.
    Answer Applies to: California
    Replied: 1/23/2015
    Deborah F Bowinski, Attorney & Counselor at Law | Debby Bowinski
    You cannot sell the property without fully satisfying both mortgage loans unless you receive permission from one or both lenders for a "short sale". You must get the lenders to release their liens in order to deliver clear title to a potential buyer. The fact that the lenders cannot sue you for payment on the loans does not mean that they don't still have liens that encumber the property as collateral.
    Answer Applies to: Colorado
    Replied: 1/23/2015
    A Fresh Start
    A Fresh Start | Dorothy G Bunce
    The only way you will be able to sell your house without paying off the 2nd mortgage is 1) if you lienstripped as part of your bankruptcy 2) if the 2nd mortgage lender agrees to release its lien for less than full payment (often called a short sale). In Nevada, you can only lienstrip if you completed a Chapter 13 and applied for a lienstripping order. Although you discharged your responsibility to pay both the 1st and 2nd mortgage, the property also owes on both of the mortgages and the obligation of the property to pay these mortgages would not have been affected by your bankruptcy.
    Answer Applies to: Nevada
    Replied: 1/23/2015
    Scott Goldstein | Scott Goldstein
    You will have to pay off the second mortgage because the lien remains.
    Answer Applies to: New Jersey
    Replied: 1/23/2015
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    Second is entitled to be paid, they have a lien on the house. All the bankruptcy did was wipe out your personal liability to pay it. The lien remains.
    Answer Applies to: California
    Replied: 1/22/2015
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