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Bankruptcy & Second Mortgage

Mortgage Library: Ask a Mortgage Related Question: Answers: Bankruptcy & Second Mortgage

Question:

I was wondering if there is something out there that can help out my situation. My husband and I have a 1st and 2nd mortgage on our home. My husband is the only one on the 1st mtg. and I'm the only one on the 2nd mtg. Due to some business complications with my husband and his brother there is a lot of law suits and so my husband is having to claim bankruptcy on the house. I have good credit but we can't reaffirm on the house and are needing to move. We can't sale our house because of the economy right now and I was just wondering if there is something I can do with them not putting a judgment on my credit. Is there debt forgiveness programs? What can I do when the 1st is foreclosing automatically on the second?

B. M.
St George
Utah

Answer:

Assuming that you walk away from this home and let both mortgages default.

You would want to pull out your mortgage note and the mortgage itself. See if each document for the first and second have a redemption or partial redemption clause. If they do not this mean the mortgage company cannot pursue then deficiency balance remaining on your loan after the sale of your home. If they do then your state man have a law in place to protect you from this called an Anti-deficiency Law. Normally this law only applies to loans used to obtain your property. So if you refinanced or obtained your second mortgage after the purchase of the home this law, if in place, may not protect you.

Additionally, if you are on the deed to the home or if your state has dower laws entitling you to the home through marriage you may be pursued for collection of this debt.

If you walk away from the home and maintain payments on your second mortgage the collateral of the loan would still be sold by the first mortgage holder. It likely would show collateral repossessed despite you paying the debt on time.

Please seek legal counsel for this issue. I am only advising you based on my knowledge and shall be held harmless from any wrongful information.

Greg Phillips
Assistant Manager 
Fairfield Mortgage Company 
FMC Office: (740) 773-5627
FMC Fax: (740) 775-1473
Mobile: (740) 571-2015

Owner
Business With Greg, LLC
Home Office Toll Free: 1-866-297-9586
Home Office (330) 334-5588
Home Fax: (330) 259-1208

Web: www.businesswithgreg.com


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