What is the difference between chapter 7 bankruptcy and loan modification? How? 9 Answers as of June 29, 2015

Our home is worth less than the first mortgage and we are worried the second mortgage is going to foreclose.

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GARCIA & GONZALES, P.C. | Richard N. Gonzales
You can do a Chapter 13 and strip off the 2nd mortgage. Meet with an experienced BK lawyer for advice. For example, I charge a nominal sum for a one hour meeting to show clients how these things work. Good luck!
Answer Applies to: Colorado
Replied: 6/29/2015
Richard B. Jacobson & Associates, LLC | Richard B. Jacobson
Loan modification is an agreement you enter into with your mortgage lender if both sides want to have such an agreement. Chapter 7 and the other forms of) bankruptcy is a federal court process in which you disclose all your property and all your debts on some fairly elaborate forms. State and federal exemptions of property have become quite generous, so you might be able to keep all your property. Consult a skilled bankruptcy lawyer: it's almost always worth the investment.
Answer Applies to: Wisconsin
Replied: 6/26/2015
The Law Office of Darren Aronow, PC
The Law Office of Darren Aronow, PC | Darren Aronow
You can file a chapter 13 and strip your second mortgage since there is no equity in the 2nd mortgage.
Answer Applies to: New York
Replied: 6/26/2015
Deborah F Bowinski, Attorney & Counselor at Law | Debby Bowinski
A chapter 7 bankruptcy will not help you at all when it comes to the 2nd mortgage unless you wish to walk away from the home. It MIGHT be possible to "strip" off the 2nd mortgage lien by way of a chapter 13 bankruptcy case if (and only if) the value of the house is LESS THAN the outstanding balance on the first mortgage loan. You should schedule a consultation with an experienced chapter 13 bankruptcy lawyer to discuss your options.
Answer Applies to: Colorado
Replied: 6/26/2015
Ronald K. Nims LLC | Ronald K. Nims
A loan modification means that the lender will stretch out your loan to lower the payments. So instead of paying $1,000 a month and paying off the loan in 12 years, you'll have to pay $800 a month and pay off the loan in 30 years. A loan modification will only affect the loan which is being modified, so unless the second mortgage lender also agrees to a modification, their lien remains on your property. Bankruptcy allows you to pay off any past due amounts in the first mortgage over five years and eliminate the unsecured second mortgage.
Answer Applies to: Ohio
Replied: 6/25/2015
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    You can not get rid of a second mortgage in Chapter 7. The United States Supreme Court ruled on this recently (as in - this term). to get rid of a second you need a ch13. You may find a lawyer at nacba.org. A loan modification is up to the lender and there are guidelines on that. Second mortgages are generally not modifiable.
    Answer Applies to: California
    Replied: 6/25/2015
    A Fresh Start
    A Fresh Start | Dorothy G Bunce
    In a loan modification, you and your lender agree to changes in repaying the mortgage on your real estate. The important word here is AGREE mortgage modification is only accomplished by an agreement. In chapter 7 bankruptcy, you discharge your legal obligation to pay debts. Don't pay the mortgage,and the lender can foreclose. Nothing changes as to the mortgage except that if there is a foreclosure, the mortgage company can't sue to collect the difference between the sales price and what was owed on the note. Which mortgage companies rarely bother to do anyway.
    Answer Applies to: Nevada
    Replied: 6/25/2015
    Patrick W. Currin, Attorney at Law | Patrick Currin
    In bankruptcy the second is completely erased when no longer secured by the property, so that's the path to take.
    Answer Applies to: California
    Replied: 6/25/2015
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    A loan modification is just that - a loan modification. It doesn't address the rest of your financial situation, whatever that may be. A Chapter 7 bankruptcy is a liquidation whereby you discharge all of your existing debt. However, you will still be responsible for making the payments on the mortgages. Given your situation, you may qualify for a Chapter 13 bankruptcy and in so doing you might be able to essentially remove the second lien in its entirety. You would have to pay at least something each month as part of a repayment plan, but that amount is determined by your income/expenses, among other factors. Given your situation, you really should consult in person with a bankruptcy attorney at your earliest convenience - you might receive some pleasant, or at least uplifting news. There is light at the end of the tunnel!
    Answer Applies to: California
    Replied: 6/25/2015
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