Chapter 7 and Real Property with 1st and 2nd in CA
My home is currently worth around $130,000
I have a 1st with Homeq Servicing of $282,000 with a monthly modified loan payment of $1,355 (includes taxes/insurance). I am 23 days late with this payment.
I also have a 2nd mortgage with Citifinancial with a balance of $21,800. I am about 11 months in arrears on this loan and they have just turned it over to collections. I stopped making payments on the 2nd on the advice of an attorney because my home was in the initial foreclosure proceedings last year but then I ended up getting a loan modification on the 1st.
I went to see a BK attorney yesterday because my employer was served with a wage garnishment for a Citibank credit card judment and I figured now was the time to finally file the BK. It's been in the works for about 2 years now but I just keep putting off the inevitable. I was told that unless I plan to bring the 2nd current, I must surrender the property.
So, my question is this, do I contact both the 1st and 2nd and tell them that after I file?
What if I keep making the payment on the 1st, will they still take the property?
Any advice would be much appreciated.
Answering your second question first, concerning making the paym
Answering your second question first, concerning making the payment of the 1st, if you stay current with the 1st mortgage, the 1st will not forclose. The 2nd mortgage is unsecured in that you have negative equity of approx. $173K. The 2nd is not likely to start foreclosure proceedings because there is no equity for them to collect payment of the mortgage. Because the 2nd is unsecured it becomes a personal unsecured debt which the lender can sue upon, get a judgement and collect by garnsihment, levy, etc. If you allow the home to go to foreclosure the 2nd merges into the foreclosure and it still becomes unsecured. However, the big difference is that because it is unsecured the 2nd is dischargeable in a Chapter 7 proceeding. There is another approach if you file a Chapt. 7 and you want to keep the property which is called "lien stripping" of junior liens on the property. Discuss this with your BK attorney