Monday, February 16, 2015

Defaulted Mortgage Affecting Chapter 13 Bankruptcy Filing

Question: My son and I own a house he lives in. He is responsible for the first mortgage on this property. I took out a second mortgage on this property and at a later point filed Chapter 7 bankruptcy, which discharged me from the second mortgage on the property. My son is trying to file Chapter 13 bankruptcy. Although my son did not sign any documents on the second mortgage, his attorney is suggesting that my son’s ability to file bankruptcy might be affected by this mortgage as its bank could foreclose on the property. Therefore, my son is being advised to get current on the second mortgage and continue making monthly payments on it. This is something he cannot afford at this time.

Response: It’s a little unclear why your son would be responsible for the second mortgage to begin with if he did not sign the note. If you are the only one on the note, and your liability was already discharged, then it doesn’t affect your son. If you both signed the note and your liability is discharged but he remained liable, then it’s a different story. For Chapter 13 bankruptcy purposes, he would have to make a payment plan to repay his debts but the equity in the home would also come into the picture. He may be able to get away with more if there is little or no equity. Otherwise, it is true, he may face difficulties in filing Chapter 13 bankruptcy.

In the legal blog, Attorney Svetlana Kaplun addresses typical questions our firm has received from our clients, or come across from homeowners related to foreclosure, foreclosure defense, loan modification and bankruptcy topics.

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