Many debtors filing bankruptcy have several mortgages attached to their home. In most cases they have both a 1st mortgage and a 2nd mortgage attached to their principal residence. We’ve talked before about how debtors are sometimes able to have their 2nd or even 3rd mortgage discharged as unsecured debt if the mortgages are worth more than the value of the home. But sometimes the 2nd and 3rd mortgages have already placed liens against your property and in that case you may be facing a different monster.
Here’s what you need to know:
- While it is rarely wise to reaffirm a debt in bankruptcy even a mortgage debt, just because you don’t reaffirm your mortgage debt, doesn’t mean that you will get to hold onto your home without paying your mortgage. If you fail to pay your primary mortgage, the mortgage company can foreclose on the house and evict you after bankruptcy. While 2nd and 3rd mortgage creditors don’t have much power other than the power of liens and time because of your home’s current lack of value.
- Often times, 2nd and 3rd mortgage lenders wait until a property has increased in value to the point where they cover the secondary loans. At that point they will begin to enforce their rights if they have not been discharged in bankruptcy and they have a lien. To make this clear, if a 2nd or 3rd mortgage loan has not been discharged in bankruptcy, they will be able to enforce their rights once your property increases in value. They may not be able to “force” you to pay them; but they can attempt to foreclose on the property if they have a lien on your property and you have failed to pay them, even after bankruptcy.