After Chapter 13 Bankruptcy, Mortgage Problems Continue

31 Jan After Chapter 13 Bankruptcy, Mortgage Problems Continue

Mortgage companies often fail to discharge a mortgage, even in the face of a Court order directing them to do so.
When you file a Chapter 13 bankruptcy, you often can get rid of your second mortgage if the balance of the first mortgage is greater than your home’s value. If this is the case, the Chapter 13 treats the second mortgage as if it were an unsecured debt, and when you successfully complete your Chapter 13 plan, the second mortgage is discharged.

Assuming that your bankruptcy attorney properly prepared your Chapter 13 plan, the confirmation order should also direct the mortgage company to prepare a discharge of the lien on your property, and either deliver it to the Chapter 13 Trustee to hold until you get your discharge, or send it to you directly after the discharge. In some Courts, your attorney may have to make a separate motion, or even commence an adversary proceeding to achieve this lien release.

Unfortunately, it is often the case that the second mortgage company is not responsive to the court order and your attorney’s efforts to get the lien release. When this happens, your attorney will have to go back to court to force them to produce the lien release. The mortgage company should then have to pay for any damages and legal fees for this effort.

If you are presently in a Chapter 13 your plan is to avoiding your second mortgage, be sure to discuss this matter with your bankruptcy attorney before it becomes a problem in the future.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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