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Can a lender sue to collect 2nd mortgage after Chapter 7?

Many times, filing for bankruptcy in Florida will give a person some debt relief while still being able to keep his or her home. Chapter 7 bankruptcy discharges most debt and lets people obtain a fresh financial start. However, if someone has been faithfully paying a second mortgage after successfully completing a Chapter 7 bankruptcy, what happens if they later find out the bank had written off the loan rather than reaffirming it? Are they off the hook if a collection agency took over the debt, even if the homeowner never heard from the agency?

A bankruptcy adviser says the lender of a second mortgage can't sue the homeowner after Chapter 7 bankruptcy, and doesn't have a legal right to pursue the loan. But bankruptcy doesn't remove the liens placed on the home from first and second mortgages. These loans, and liens, would be owned by the new collection company. The homeowner would be protected from lawsuits to collect the debt, but the collection agency would be able to foreclose if monthly payments weren't being made.

Homeowners in this situation may be able to contact the new company and renegotiate a reduced monthly payment or settle the balance, to take care of the lien on the property. The laws regarding bankruptcy can be complicated, and any mistakes made by trying to navigate the system alone can negatively affect a consumer's recovering credit, or cost his or her home. It's recommended to consult with a bankruptcy attorney both during a bankruptcy, and afterwards to address any lingering issues.

Source: Fox Business, "After Bankruptcy, do I Owe on 2nd Mortgage?" Justin Harelik, Mar. 20, 2013

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