Does a loan modification after a Chapter 7 reaffirm the loan?
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Does a loan modification after a Chapter 7 reaffirm the loan?
I filed a Chapter 7 bankruptcy 2 years ago. This included my 1st and 2nd mortgage and they were not reaffirmed. I worked out a loan modification with my lender on the 1st so we could stay in the home. They are now trying to foreclose on the 2nd, which we haven’t paid in2 years. So, if we decided to just walk away, can the bank come after us for modifying our 1st? I checked my credit report and the bank has not been reporting for 1 1/2 years and they both say $0 (discharged in bankruptcy).
Asked on August 1, 2012 under Bankruptcy Law, Washington
Answers:
Terence Fenelon / Law Offices of Terence Fenelon
Answered 11 years ago | Contributor
Very Interesting question which I have never encountered. Let't see if we can break it down?
The 2nd mortgage, which you never reaffirmed, is filing a foreclosure. Is the company the same as the first? if not, then the debt is discharged and the bankruptcy discharge would be a defense in the civil foreclosure suit. Tou should get an attorney to properly present the defense to the Court.
The first mortgage, however, may be treated differently. The modification was entered into AFTER the discharge. Thus, a new contract, post petition, arises and you may have a liablility for a deficiency which arises. If the 1st and 2nd mortgage holders are identical, look to the terms of the modification agreement to determine if you have cross-coolateralized the rights of the mortgage holder to proceed against either of the secured liens.
GOOD LUCK
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