What are the consequences of walking away from an un-reaffirmed 1st and 2nd mortgage after bankruptcy?

UPDATED: Aug 18, 2011

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What are the consequences of walking away from an un-reaffirmed 1st and 2nd mortgage after bankruptcy?

Bankruptcy 5 years ago; didn’t reaffirm mortgage but have been paying it. Thinking about stopping the payments and saving them towards a down payment on another house and also using that time to repair and improve my credit to the point of being able to qualify for a home loan. Is this idea even a realistic possibility?

Asked on August 18, 2011 Colorado


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

You first need to consult with a bankruptcy attorney regarding the first and second mortgages that are recorded on your property and which apparently were in place when you filed for bankruptcy protection.

The reason is that assuming that both of the mortgages were purchase money loans (split loans 80 % and 20% when you ourchased the home) there would most likely have no recourse if you defaulted on them and the home sold for less than is owed on both of them because Colorado has anti-deficiency statutes on purchse money loans.

However, if the second trust deed is not a purchase money loan and it gets wiped out by a foreclosure by the first, you could owe on it if your bankruptcy filing and assumed discharge did not protect you as to it.

Good luck.

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