Mortgage Discharged in Bankruptcy is NOT Free and Clear?

August 2014 UPDATE:  Fannie Mae has made a significant change is how it views mortgage debt included in Bankruptcy.

Now, if you had a foreclosure, short sale or deed in lieu of foreclosure after the Bankruptcy, the waiting period to buy again begins from the Bankruptcy discharge date, not the subsequent removal of your name from title! – Read More Here >> Fannie Mae Waives Waiting Period After Bankruptcy

Mortgage Discharged Through Bankruptcy

Much of this conversation has taken place in the comments sections of two articles from a few months back – Buy Again After Bankruptcy, Foreclosure and Buy Again One Day Out of Short Sale.

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All of the conversations I have had around this subject are very similar in that:

  • I discharged my mortgage through bankruptcy
  • The home is upside down but I didn’t want to lose it
  • Now I want to buy a new home with a more affordable payment

What it boils down to is that when mortgage debt is discharged through BK, it does not mean that you own the home free and clear, and it doesn’t mean that you’re off the hook for the mortgage.

When mortgage debt is discharged, you are protected against any personal liability should the home foreclose through or after the BK – this essentially means the lender cannot come after you for their losses.

Many times the mortgage debt will show up on the credit report as “included in bankruptcy” with is slightly deceiving because it implies that the debt is no longer owed…which is not the case.

The challenge is that if you decide you do not want to be shackled by  your upside down mortgage at any time in the future, you are still facing either foreclosure or short sale to rid yourself of the home.

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To buy again after bankruptcy you have to wait for 24 months before you can use a FHA loan for the purchase of a new owner occupied home.

Once the bankruptcy is complete, homeowners are still faced with the fact that refinancing into today’s lower rates is not possible due to the fact that the home is upside down.

Renting the home out to buy again after the 24 month bankruptcy wait is also a challenge, as I have detailed in this article: Can I Rent Out My Upside Down Home and Buy Again?

I am keeping a close eye on this, I think that many home owners are in this situation now after filing for bankruptcy a couple of years ago.

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I think this is an important conversation to have as there are many families trying to get back on their feet after tough times.his topic?

Do you have any experience or questions around this topic?  Please leave comments and questions below if you have a specific situation you would like to discuss.

  1. Had two mortgages, 80/20. both discharged in error in bankruptcy. Have been paying on one of them. The 20% portion I thought had written it off. I never reaffirmed or paid. All of a sudden I started getting paperwork from a company saying they bought the loan. This is the first time I am hearing from this 20% portion of the mortgage since 2009-2010. It says it was recently purchased by a private lender and they are invoking their right within the mortgage documents to a reasonable inspection. My phone has been blowing up telling me I owe this money and to enter into an agreement with them or they will foreclose on it. They sent a letter with an offer to resolve the past due amount. What do I do? Can they foreclose? Can they harass me and ask to pay after 7 years of nothing? Do I ask for proof of something? The sale, any documents, etc.? I live in Wisconsin.

    comment by Meghan
    on 7.8.17 at 3.26 pm
    1. Hi Meghan,

      If you stopped paying on the 20%, they do have the right to foreclose. If you plan to stay in the home, I would definitely try to settle with them.

      Do you have equity in the home? Maybe you can refinance and pay them off?

      Do not ignore their calls, and verify that they own the note and have the right to foreclose.

      comment by Scott Schang
      on 7.8.17 at 3.36 pm
  2. Hello. My chapter 7 b/k was discharged in August 2008. I had 3 investment properties with 2nd mortgages which where not AFFIRMED. I sent copies of the discharge papers to the banks/mortgage companies. Out of the blue, OCWEN, the snake oil company, bought the right to my 1st and and now included the discharged 2nd mortgage from 2008 and demand payment!!!. Every time I call OCWEN for an explanation regarding adding a discharged 2nd mortgage on their website, they give a million reasons and I get transferred to India where they have no idea what I am talking about. I want to know my legal options because this snake oil of a company never give me straight answer. I know the Supreme Court ruled , I believe in 2013 or 2014, on the 2nd mortgage. The banks cannot go back and seek payment. I don`t have any 2nd loan on my current residence. I need your assistance

    comment by OLufemi Faro
    on 6.27.17 at 10.56 am
    1. Hi OLufemi,

      I am not an attorney, and my advice would be to contact your bankruptcy attorney and have them issue a cease and desist order to OCWEN. If your mortgages were included in the bankruptcy, then they do not have a right to attempt to collect on these debts.

      I am a mortgage lender. If this issue with OCWEN is preventing you from getting financing on your current residence, that’s something I can help with.

      comment by Scott Schang
      on 6.27.17 at 11.12 am
  3. Hi Scott, my wife and I filed ch7 in 2012 and our mortgage was discharged. The house was never forcloced on and our names remained on the deed. Recently the mortgage company has contacted us about what we want to do. He told us that our black protection has ended. The house has been vacant since the bl and we don’t even live in CA any more. He said our options were a short sale or loan modification? My question is whether or not we are financially responsible for either of these options. I thought we were clears after the discharge.

    comment by Brian
    on 6.21.17 at 5.57 pm
    1. Hi Brian,

      The short sale or a deed in lieu of foreclosure would be the option you want. You are not financially responsible, but you are going to be prevented from qualifying for another mortgage until you get the lien removed from the property. You have to get your name off title.

      A loan modification will not do you any good unless you want to rent the home out.

      Hope this helps?

      comment by Scott Schang
      on 6.21.17 at 8.03 pm
  4. The loan company partition the court to come out of bankruptcy, My home was sold, but the Judge has not yet rectified the sale in Maryland. Is there anything else I can do ?

    comment by Henry
    on 6.15.17 at 8.33 pm
    1. Hi Henry,

      I am not an attorney, and am not familiar with the foreclosure laws in Maryland. I’m sorry, but I would not be able to give you an educated opinion on what your current status or options would be. I would recommend you contact your bankruptcy attorney with these questions.

      Hope this helps?

      comment by Scott Schang
      on 6.16.17 at 9.58 am
  5. Hi! My house was discharged in Ch 7 BK back in 2010 in MA.. The bank has not made any moves to foreclose as of yet. Morgage is no longer on credit report and bankruptcy is coming off soon. I assume the bank is waiting for discharge to come off credit report before foreclosing. The house has been empty since we filed for bankruptcy. Bank keeps buying insurance and winterizing the home. Not sure how any of this will have an effect on buying again, which we would like to do, sooner rather than later. Applied for a mortgage loan last year and were told to come back this September and not to worry about foreclosure. Is that bad advice? Looking into USDA 502 Guaranteed Rural Housing Loan Program. Thanks so much!

    comment by Christina
    on 6.13.17 at 10.56 am
    1. Hi Christina,

      My experience with USDA is limited, but what I have run into is that USDA is going to require that your name be removed from title to that home before they would allow you to use the Guaranteed financing.

      I have lender friends that have had success under these circumstances using Conventional financing while you are still on title, as long as you do not live in the home.

      If you think that Conventional is an option, I’m happy to introduce you to someone that has experience with this scenario.

      Shoot me an email to [email protected] with the State you’re buying in, and the best contact information for you, and I can make that connection.

      Hope this helps?

      comment by Scott Schang
      on 6.13.17 at 11.53 am
      1. Thanks! I will email you shortly. I just assumed that surrendering the property during the bankruptcy would have removed our name off the title. Sigh.

        comment by Christina
        on 6.13.17 at 12.12 pm
        1. That’s one of the things that BK attorneys never explain properly. Bankruptcy does not affect your ownership. Liens always survive a bankruptcy unless specifically ordered by a judge. The worst part about your scenario is that you surrendered the home years ago, and the bank has not foreclosed.

          I really think something needs to be done to help folks in your situation. If a home has been abandoned for years, the bank needs to foreclose. It’s crazy that they don’t.

          comment by Scott Schang
          on 6.13.17 at 12.18 pm
          1. Do we have any options? Deed in Lieu of foreclosure? We just got a letter stating that the escrow account has a shortage or deficiency in the balance of $35,000, which makes no sense to me. So frustrating.

            comment by Christina
            on 6.13.17 at 12.28 pm
          2. You own the home. You can sell it, and if you owe more than it is worth, it’s a short sale. Or you can negotiate a deed in lieu with the lender. Either way, I would contact the lender and see what your options are. They cannot pursue you for collection, and taking your name off title by short sale, deed in lieu or foreclosure will not show up on your credit report.

            It would be a matter of public record if the mortgage was not paid in full, but it will not affect your ability to be eligible for new financing using a Conventional loan.

            comment by Scott Schang
            on 6.13.17 at 12.33 pm
  6. Hi Scott we filed chapter 7 in 2015 and included our home. The trustee felt our home was worth more than we David and decide to try to sell it to help with our debt. Now almost two years later we get a court order wanting 1200 dollars for his services. How is this possible.if we surrendered the house and moved out almost two years ago.

    comment by Cynthia Harker
    on 6.6.17 at 2.41 pm
    1. Hi Cynthia,

      I would recommend that you get advice from an attorney regarding this matter. I would think that the trustees fees would have been included in the bankruptcy. I hope this helps?

      comment by Scott Schang
      on 6.6.17 at 6.12 pm
  7. I live in Missouri. Ch7 discharged in Mar 2013. Mortgage was not reaffirmed. I have continued to live in the home and make payments. I would now like to move. Do I need to sell this home prior to obtaining a new mortgage? I’m concerned I am unable to sell the home for what is still currently owed. If I decided to walk away would a foreclosure show on my credit report and ruin the credit I have taken all this time to rebuild? I have called several bankruptcy attorneys, including my own and they either do not have an answer or are unwilling to answer. The last one I spoke to told me to ask the mortgage company. The mortgage company did not give me a straight answer and told me to ask the credit bureau. The credit bureau says that yes, if I were to allow the home to foreclose that it would be reported on my credit report and would significantly impact my score. I’m not sure who to believe at this point!!

    comment by Brooke
    on 6.6.17 at 12.20 pm
    1. Hi Brooke,

      I can definitely help here. You do not have to sell the home, but it might be necessary to do something with it (either sell or rent) to be eligible for financing on the new home.

      First, let’s talk about your mortgage on your new home. While you would technically be eligible for a FHA loan 2 years from the discharge of the bankruptcy, FHA would not lend to you unless you are buying more than 100 miles from the current home. If you have to sell the home for less than the amount owed, FHA would require an additional 3 year wait if you did a short sale, deed in lieu, or foreclosure on this home.

      If you are moving 100 miles away from this home, FHA would allow you to buy a new home if you rent out the current home, and qualify for both payments on the current, and new home.

      The best option here is conventional financing. A conventional loan will allow you to buy 4 years from the discharge of the bankruptcy, you can rent out the departing residence, and could potentially use 75% of the rents to offset the payment when qualifying for the new mortgage.

      If you have to sell, and if it is for less than what you owe, or if you do a deed in lieu of foreclosure or a foreclosure, none of these options will show up on your credit report, but it is a matter of public record and will affect your timeline for buying using FHA financing.

      With conventional financing, you can ignore any subsequent default as long as the mortgage was discharged through bankruptcy.

      If you would like to speak to a lender that is familiar with these guidelines, shoot me an email to [email protected] and let me know where you’re buying. I have lender friends all over the Country that have experience with these guidelines and will help you figure out your options.

      Hope this helps?

      comment by Scott Schang
      on 6.6.17 at 6.41 pm
  8. Hi Scott,
    Our home was discharged in BK in 2009. The bank has tried several times to foreclose and we just received foreclosure docs again for auction in September. If we do a deed in lieu, does that open any liability for us to this house. Is it better on our CR than a foreclosure? If it is, can you give an example.
    Thank You. I have found this thread to. E very informative and comforting.

    comment by Christina L.
    on 5.24.17 at 6.34 pm
    1. Hi Christina,

      It makes no difference whether your name is removed from title through foreclosure, or deed in lieu. It will not be reported to your credit, and will not in any way affect your ability to buy another home.

      Using conventional financing, you are actually eligible to buy as soon as your name has been removed from title. A deed in lieu of foreclosure is actually a preferred method for doing this, only because it give you control over the timelines. As you can tell, it can take years for the bank the foreclose.

      If you are interested in buying a home as soon as the deed in lieu/foreclosure is complete, shoot me an email to [email protected] and I can introduce you to a lender that has experience with these guidelines.

      Hope this helps?

      comment by Scott Schang
      on 5.24.17 at 7.02 pm
  9. Filed bankruptcy well over 7 years ago including home. No longer shows on my credit report that I have a mortgage. We are in the end stages of actually being foreclosed upon and will be moving out soon. Even though house was included in bankruptcy which no longer appears on my credit report – when the actual foreclosure is finalized will that show up? Wondering if we will ever be able to purchase a house again.

    comment by Shana
    on 5.23.17 at 5.35 pm
    1. Hi Shana,

      No, the foreclosure will not show up on your credit report, but it is a matter of public record. You would be eligible to buy a home using Conventional financing as soon as your name is removed from title on this home. There is no additional waiting period beyond a 4 year wait from the discharge date of the bankruptcy.

      If you were to apply for FHA financing, there is a 3 year wait from the date of the foreclosure, or the date your name is removed from title.

      There are not many lenders that understand these guidelines. If you would like to speak to a lender that has experience with these guidelines, shoot me an email to [email protected] and I can introduce you to someone that I know and trust.

      Hope this helps?

      comment by Scott Schang
      on 5.23.17 at 6.28 pm
  10. I recently filed a chapter 13 I so confused my homes are free in clear my lawyer advice me to surrender them can I still live n my home my chapter 13 was denied due to my address was incorrect but I told my lawyer I appear ty did nt provide a credit union acct I informed my lawyer failure to provide creditors pendencyof processing I missed three payment that was not mention in the letter I received due to I was on a medical from my employer I Dnt knw Wht going on Wht do I do am I gone to lose my home & vechile I so confused some please advise me thank you I’m a single mother with three children

    comment by Charlette
    on 5.15.17 at 8.43 pm
    1. Hi Charlette,

      I would get a second opinion from another bankruptcy attorney. It doesn’t make sense that your attorney would tell you to surrender your home. If your home is free and clear, it seems like you could either take a loan out, or sell the home and pay your bills?

      I am not an attorney, and I would strongly recommend you get a second opinion.

      Hope this helps?

      comment by Scott Schang
      on 5.16.17 at 9.52 am
  11. I filed bankruptcy 7 years ago my house did not get reaffirmed I got behind a few times but I quickly get caught back up can they apply late fees even if I am making volunteer payments?

    comment by Christopher
    on 5.6.17 at 7.44 pm
    1. Hi Christopher,

      Yes, they can charge late fees. You are not really making voluntary payments, you still own the home. If you stop making payments, the lender can foreclose, and take the home back. As long as you intend to stay in the home, you need to continue to make all of your payments.

      Hope this helps?

      comment by Scott Schang
      on 5.7.17 at 1.11 pm
  12. I filed for bankruptcy last year which was final last may, now the bank wants to forclose on my home, my husband and I are on the mortgage but he didn’t file bankruptcy— should he file now or is it too late?

    comment by Michelle
    on 5.4.17 at 2.46 pm
    1. It is not too late. I would definitely recommend consulting a bankruptcy attorney to see if your husband would incur any tax liability if they were to foreclose without him having the debt discharged.

      comment by Scott Schang
      on 5.4.17 at 2.58 pm
  13. My husband and I filed BK Chap 7 in July of 2011. We surrendered our home in the bankruptcy which was located in Las Vegas, Nevada. We had stayed in the home for about two and a half years past the discharge date. The mortgage company never came and took back the home. We moved out of state in May of 2013. I called the mortgage company and let them know we were leaving. I shut down all the utilities in our name and locked up the home. In November of 2013 the HOA came in and sold the property out from under the mortgage company. The titling on the property according to the Clark County says someone brand new on the title. Our names are off the home but to this day I am getting mortgage statements from the mortgage company. Also according to these statements we are receiving they are paying the taxes and I get insurance statements from the homeowners insurance company that the mortgage company is paying for homeowners insurance every year. We haven’t lived in the home for almost 4 years. I called the mortgage company and they have stated that the loan is in litigation not with us though. We just want to be completely free of this home. How do we accomplish this?

    comment by Danielle B
    on 4.27.17 at 11.18 pm
    1. If you included the mortgage in your bankruptcy, then they should not be sending you anything. I would contact your bankruptcy attorney and have them send notice to the mortgage company that the debt was discharged.

      It sounds like it might be a mistake by the mortgage company.

      comment by Scott Schang
      on 4.28.17 at 9.35 am
  14. In 2010 November I went for my initial divorce hearing, at that time it was court appointed that the marital home would be foreclosed on and all payments to the mortgage are to stop. This is in the initial hearing documentation. In April of 2011 I filed for chapter 13 my soon to be ex did not. The chapter 13 did include the home that was to be forced foreclosure. I also contact the lender and sent them the court order. In July 2011 my divorce was finalized and my chapter 13 was modified to a chapter 7.

    It was completed in Nov 2011. In Feb 2014 my ex filed for bankruptcy and included to mortgage due to the bank not taking the home as of yet. Her chapter 13 included the home loan.

    She finished paying her ch 13 payments in Feb of 2015. The home was then sold in Feb of 2016 in auction.

    I am trying to purchase a home with VA and was supposed to close on the home in 4 days when the lender advised me I am not eligible now because of the time between the foreclosure and my loan request. I was never advised that the home was transferred to a second lender during the foreclosure or anything about the foreclosed home until yesterday.

    I wanted to know if this is correct that I do not meet the waiting period in order to obtain the VA loan on a home being sold by a person? I also would like to know if I am eligible where can I gain the information I need to provide the lender with in order to prove this?

    comment by John M
    on 4.22.17 at 2.30 pm
    1. Hi John,

      Unfortunately, VA is going to require a 2 year waiting period from the foreclosure date. The fact that the mortgage was discharged through bankruptcy does not matter with VA. Your lender should have known this, and you never should have been allowed to get this far in the process. That is a critical mistake that your lender made.

      You would be eligible to close on your home using Conventional financing, which will use the Bankruptcy discharged date, and ignore the foreclosure date. This is a standard Conventional guideline.

      The minimum down payment would be between 3% and 5% of the purchase price.

      If you lender does not know how to do this, shoot me an email to [email protected] and I can introduce you to someone that can.

      Hope this helps?

      comment by Scott Schang
      on 4.22.17 at 3.54 pm
  15. I have completed my Chapter 13 and repaid all of my debts at 100% with no missed payments. My second mortgage was stripped from my mortgage and I received a 1099C while still insolvent. After checking with our County Title and Deed office, the Lien has been removed and does not show up on our County Records. Do I have to report that my second mortgage was foreclosed when applying for a VA CASH OUT- refinance?

    comment by JAMES E PATTERSON
    on 4.21.17 at 5.33 pm
    1. Hi James, that would not be considered a foreclosure. If anything it would be a short pay if it was settled for less than the amount owed. FHA is ok with this, I believe VA would be as well. You are not disclosing that you had a foreclosure, but I would make sure your loan officer understands what happened so that they can answer this question before you pay for any appraisal.

      If you would like an introduction to a VA expert, shoot me an email to [email protected] and I can see if I know someone I can connect you with in your State.

      Hope this helps?

      comment by Scott Schang
      on 4.21.17 at 9.30 pm
  16. Hi..I had a chapter 7 discharged 2004. I didn’t include my home in it. At least not that I was aware. I went to talk to my current mortgage company about refinancing and they said I had to call back when​ the bankruptcy department was in since my mortgage was discharged. What does this mean? And what do I do to be able to go out and get a loan for a new house. We were looking to either move or replace our current house on the property.

    comment by Stacey Cronrath
    on 3.28.17 at 8.00 am
    1. Hi Stacey,

      It doesn’t mean anything. You can refinance your mortgage as long as your payments have been made on time. What State do you live in? I can introduce you to a lender that has experience with these guidelines and can help.

      You qualify for the same type of mortgage loan as someone that never had a bankruptcy. As long as you’re beyond the “waiting period” required by the guidelines, you are eligible for traditional loan.

      The waiting period after a bankruptcy for conventional financing is 4 years. FHA is 2 years.

      Hope this helps?

      comment by Scott Schang
      on 3.28.17 at 10.57 am
  17. I filed Chapter 7 in 2010 which included a mortgage debt from a home I owned with my now ex-husband and the mortgage was discharged. My name was removed from the deed and NOT the mortgage. I was told by the bank that since he has not made on-time payments for a 12-month period, my name cannot be removed. Since it had been discharged, the bank cannot report to any credit bureaus. In the meantime, I am buying a new home with my fiance’ and told my name cannot be on the mortgage until my name is off the other mortgage. We want to put my name on the deed though. I want to know if there are any judgments against my ex-husband, can they be attached as a lien to the mortgage which would implicate me and my new home?

    comment by Lisa Arciprete
    on 3.26.17 at 8.10 pm
    1. Hi Lisa,

      You would actually be eligible to go on the new loan. Because the mortgage was discharged, you are not financially liable for the mortgage debt. Since you were removed from the deed, you are not liable for anything that your ex does in regards to the mortgage.

      No liens can be put on your new home, any judgements against your ex cannot be held against you, and you would be eligible go on the loan.

      If you would like an introduction to a lender that has experience with these guidelines, shoot me an email to [email protected] and I will be happy to make that connection.

      Hope this helps?

      comment by Scott Schang
      on 3.26.17 at 9.40 pm
  18. I filed a chapter 7 which included a mortgage debt from a home I owned with my now ex-husband. The bankruptcy was discharged in 2013. The house was sold as a short sale in 2016 which I signed off on because my name was still noted as having part ownership as the property never foreclosed. How does this affect me in moving forward and buying a home on my own? I was recently pre-approved for an FHA loan but I am concerned about the short sale because it occurred after my bankruptcy. Thanks for your assistance.

    comment by Saron Gager
    on 3.23.17 at 7.32 pm
    1. Hi Saron,

      You would not be eligible for FHA. The loan officer may have looked at your credit and saw that there was no mortgage being reported because it was included in the BK.

      You would be eligible for Conventional financing, 4 years from the discharge of the BK, as long as the mortgage was discharged.

      What State are you trying to buy in? I can introduce you to a lender that has experience with these guidelines and can help.

      Your current lender does not know what they are doing and would have put you in a very bad situation.

      Hope this helps?

      comment by Scott Schang
      on 3.23.17 at 8.38 pm
  19. Hey Scott, thanks for offering your knowledge here. It’s appreciated.
    Anyway, a mortgage was included in a 2010 BK7 and wasn’t reaffirmed. They continued to live there and make payments until last year. Now the home is in foreclosure with an upcoming sheriff’s sale in a month.
    There’s nothing on their credit report about a mortgage and they want to buy a new home. It would most likely be after the date of the sheriff’s sale.
    Is it possible for them to get approved for a conventional loan right now if they give deed in lieu to get their names off the title or get the bank to extend out the sheriff’s sale date to short-sale the home since they will not be liable for any deficiency?
    Thanks again

    comment by Russ
    on 3.22.17 at 4.00 pm
    1. Hey Russ, my pleasure!

      Ok, this exact scenario is the only time I ran into a challenge getting someone approved in exactly this situation. If they are in the property at the time of application, you’re not going to be able to get it through the underwriter if they call Fannie Mae on it. You’ll get a DU Approve/Eligible on it all day long, but it might hit a wall once everyone figures out that you’re trying to do a concurrent foreclosure/deed in lieu & new purchase.

      My recommendation would be to move out of the home, rent month to month, or live with relatives until the their name is removed from title. Once they’re off title, you should have no issues getting this through on a new purchase.

      Hope this helps?

      comment by Scott Schang
      on 3.22.17 at 6.11 pm
      1. Scott, you are seriously awesome that you do this. I hope that your fast and free guidance is getting you an amazing amount of business.

        My gut was telling me that there’s going to be an issue with this getting final approval and you just confirmed my suspicion.
        Thank you, Scott!
        You saved us lot of time, heartache, and pain.

        comment by Russ
        on 3.24.17 at 1.52 pm
        1. Thanks Russ! Yeah, I do ok. More importantly, I LOVE that this crazy blog helps so many people. Who woulda thought?

          comment by Scott Schang
          on 3.24.17 at 3.10 pm
  20. My husband and I filed CH13 in 2008 and then filed a motion to surrender our home in 2010. In 2013 the bank sold the loan to another service in 2013. We were discharged in 2013. Our BK attorney told us to ignore them because we were no longer liable. It’s now 2017 and we’re just now being informed that the house never foreclosed due to my husband being active duty and that the current bank was never aware of the BK. Also, the City and County of Honolulu has fined us fees since 2013 for poor maintenance of the property. We were also informed that there are squatters in the property. It has been a nightmare to find out that our names are still on the title. What can we do at this point?

    comment by Edelyn
    on 3.13.17 at 9.28 am
    1. Hi Edelyn,

      Since you have bankruptcy protection, I would talk to a local Realtor about perhaps doing a short sale? I am not familiar with Honolulu local laws regarding the fines, but I would imagine that they have recorded a lien against the property and would collect upon sale of the home.

      A Realtor that specializes in short sales would be responsible for negotiating with the lien holder to get them to accept whatever they can get in exchange for removing the lien(s).

      If you need an introduction to a local Realtor that can help, shoot me an email to [email protected] and I will see what I can do to connect you with someone I know and trust. I happen to have a Realtor friend on the Island.

      In addition, once you get your name off title to that home, you are eligible to buy again right away using Conventional financing. So there’s good news there!

      Hope this helps?

      comment by Scott Schang
      on 3.13.17 at 10.23 am
  21. I was on a mortgage with my husband. We got divorced. I discharged the mortgage in chapter 7 in 2011. I also signed a quit claim deed which shows in the property history as a gift sale, transferring ownership solely to my ex husband that same year. 2 years later the bank foreclosed on my ex. I’m currently attempting to get a conventional mortgage, but two different banks have told me that the foreclosure also applies to me and I have to wait 7 years from then to qualify for conventional mortgage. Shouldn’t the discharged and gift sale remove me from the foreclosure? My credit report does not mention a foreclosure. Thank you in advance. (I am in Virginia)

    comment by Carlye
    on 3.4.17 at 6.34 am
  22. I filed BK in 2014 we were recently declined for modification. Letter saids “Records indicate that your obligation has either been discharged or subject to an automatic stay under the US Bankruptcy Code even though your personal liability on the note may be discharged or automatic stay the terms of the mortgage remain in effect and the owner of the mortgage as lien holder continues to have lien on real property. What does that exactly mean ? We are trying to buy more time to get the money we are past due to reinastate the mortgage to avoid short sale or deed in leu of foreclosure.

    comment by Irene
    on 2.25.17 at 10.02 am
    1. Hi Irene,

      Did you file a Chapter 13 or Chapter 7? I am not an attorney, so my first advice would be to speak to your bankruptcy attorney for a legal opinion as to the specifics of this wording. I can tell you that when you file bankruptcy, it does not affect your ownership in the property. The lien survives the BK, and if you continue to make payments, or pay off the mortgage, the bank cannot force you out of your property.

      If you fall behind on the payments, the lender has the right to foreclose on the property. I’m not completely sure what you mean about trying to avoid short sale or deed in lieu, those are typically actions that are initiated by you, the owner of the home, that need to be approved by the lender.

      Did I help answer your question?

      comment by Scott Schang
      on 2.25.17 at 12.56 pm
  23. Question discharge of chapter 7 was over 3 years ago mortgage loan was included but took the bank a year to take the deed out of my name… have tried 2 lenders both say I have to wait another 6 months until it’s been 3 years from when the deed was out of my name.

    Should I just wait or are there lenders in nv who go off discharge date?

    comment by Dan
    on 2.7.17 at 7.26 am
    1. Hi Dan,

      The answer is that you have to wait 6 more months, but not for the reasons that those lenders are telling you.

      The reason you are being told 3 years from the foreclosure is because those lenders have never done a loan for someone with a bk and foreclosure, and do not know what they are looking at.

      Your timeline will depend on the type of financing that you are applying for. Both of these lenders are looking at the BK, and thinking that 2 years from the BK, you’re eligible for FHA financing. Your credit report does not show a mortgage, so they gloss over that part. Unfortunately, FHA considers the foreclosure (or the date your name is removed from title) as a completely separate event, with a separate, 3 year waiting period. This is the reason why you have a 3 year waiting period for FHA.

      With Conventional financing, you do not have to count the foreclosure date. You can use the bankruptcy discharge as the waiting period timeline, as long as the mortgage occurred after the BK, and was discharged through the BK.

      The conventional waiting period is 4 years from the bk discharge date.

      I have a lender friend in NV that is very familiar with these guidelines, and can help. Depending on the exact dates of the bk discharge and the foreclosure, one of these two options will be available to you sooner than the other I suspect.

      Would you like an introduction? It sounds like you’re only a few short months away, and you can at least get credit-qualified, identify your price range, and start scoping out the best neighborhoods.

      Hope this helps?

      comment by Scott Schang
      on 2.7.17 at 8.05 am
  24. Chapter 7 bk discharged over 3 years ago mortgage loan included but deed wasn’t taken out of my name for another year. So far 2 lenders meet all their requirements but both say have to wait another 6 months until 3 years when deed was taken out of my name.

    In Nv are there any lenders that go off bk discharge date or do I need to just wait.

    comment by Dan
    on 2.7.17 at 7.15 am
  25. question: I filed bankruptcy, and included both first and second mortgage in the bankruptcy. The home never sold and was foreclosed on. The bank that was in second position sent me a tax notice that they are filing with the IRS for $40k. Am I responsible for this??

    comment by dm
    on 2.6.17 at 11.55 am
    1. Hi dm,

      I would check with your bankruptcy attorney, because I am not one. But in my personal opinion and experience, I do not believe that you can incur a tax liability on a debt discharged through a bankruptcy.

      comment by Scott Schang
      on 2.6.17 at 12.47 pm
  26. h. we live in maryland we have a 1st and 2nd mortgage. My husbands company went under when the bubble burst. We had to file bankruptcy in 2010. After bankruptcy we were able to pay our 1st mortgage but still unable to pay the second. Four years went by and we hadnt received a new payment book for our 2nd and never received the monthly . Those years went by with no paper. About 6 months ago we received a lien release on our home and it said the lien was satisfied in full. No where on that document does it say I will still have a lei on myself or this home if I were ever to sell. Instead it says to keep this important document in the event that I were ever to sell it. What I want to know is can this be satisfied because the sol in md are 3 to 4 years? Or did the bank (wells fargo) grow a heart? Or should I be looking for a fairy godmother to thank for paying this off.

    comment by bonnie smith
    on 2.2.17 at 12.16 am
    1. Hi Bonnie,

      It sounds like the second lien holder released the lien, so yeah, call it a heart, fairy godmother, maybe just good luck….but it sounds like that loan was forgiven and the lien was removed.

      I am not an attorney, and know nothing of MD law, but it sounds to me like if you were to sell today, you would only be required to satisfy the 1st mortgage and the rest is equity.

      comment by Scott Schang
      on 2.2.17 at 8.17 am
  27. I have an fha/hud home in foreclosure. I had left this home in 2011 due to marital breakup. My ex husband remained there for about 2 years then left. I recently received a notice to occupant of pending acquisition. It states title will be transferred to lender and shortly after to hud. I am wondering what my obligations could be? Should I file bankruptcy? I have not spoken to the lender in years (Bank of America)

    comment by Colleen Sallai
    on 1.31.17 at 5.35 am
    1. Hi Colleen,

      I think it would be a good idea to consult an accountant to determine whether or not you have a legal/tax liability that would result from the foreclosure. It may also depend on how the divorce decree was written up. If you did a grant deed to transfer off title to the home as part of your divorce, and if it’s clearly stated in your divorce decree that the mortgage is not your responsibility, then the foreclosure may not affect you in terms of buying a new home. The foreclosure action may show up on your credit, but if there is no tax or financial liability, I do not know that a bankruptcy would be necessary.

      I would definitely suggest you explore all of your options so that there are no surprises. Consult your tax person, divorce attorney to determine liability, and a bankruptcy attorney if you will incur financial liability as a result of the foreclosure.

      Hope this helps?

      comment by Scott Schang
      on 1.31.17 at 6.13 am
  28. Hello i filed bankruptcy in august 2012 and was discharged nov 2012. The mortgage company is now offering me a deed in lieu, will i be responsible for claiming this on my taxes as income.

    comment by Benson
    on 1.28.17 at 6.32 am
    1. Hi Benson, as long as the mortgage was discharged in the bankruptcy, the lender would not be allowed to send you a 1099 for any losses they may incur. While the deed in lieu is a matter of public record, and in some cases would affect the timing of your ability to buy another home, it will not affect your credit, and will not be a taxable event.

      Hope this helps?

      comment by Scott Schang
      on 1.28.17 at 7.51 am
  29. Hi Scott,
    Hopefully a quick question. Our Chapter 7 BK was discharged 4 years ago. Our home was listed on the BK. We had to walk away from the home within months of the discharge due to hardships. Today, 4 years later, we received a 1098 and a 1099-A for this tax season. We haven’t paid on this home for more that 4 years. Do I still add this to this years current taxes?


    comment by Dave Poirier
    on 1.20.17 at 9.18 pm
    1. Hi Dave,

      I am not a bankruptcy attorney, but my understanding is that if you include the mortgage in the bankruptcy, that you cannot be charged for any losses the bank incurs. I would contact the servicer that sent you the tax forms and provide them with proof that the mortgage was discharged.

      Hope this helps?

      comment by Scott Schang
      on 1.26.17 at 1.27 pm
  30. Hi Scott,
    I had a question.
    I had filed by 13 in 2009, and my second mortgage was lien stripped at the completion of my bk in 2013.
    Will I have any issues trying to refinance my current first mortgage?

    comment by Rosemary
    on 1.4.17 at 7.19 am
    1. Hi Rosemary, I think I answered your question by email? I wanted to answer it here as well in case anyone is in the current situation. As long as the bankruptcy has been discharged, you would be eligible to refinance using FHA financing 1 year from the discharge, or Conventional financing in 2 years from the discharge.

      If you have trouble finding a lender that knows this guideline, send me an email to [email protected] and I can make an introduction to someone I know and trust that can help in your State.

      comment by Scott Schang
      on 1.11.17 at 9.01 pm
      1. Scott I sent you an email regarding a pressing decision we have to make.

        comment by Lisa Runyon
        on 1.12.17 at 11.19 am
        1. Hi Lisa, was I able to answer your questions through Chat?

          comment by Scott Schang
          on 1.12.17 at 11.47 am
  31. Hi Scott, have a question, my bankruptcy has been discharged for 6 years we have been trying to short sale our house the bank wants to much for the house and we are have a hard time selling the house. All this was caused from a hardship of job loss, we are back on our feet with good paying jobs and a down payment for a new home if we do a deed in lue of sale how long until we can purchase a home, the house was included in th BK

    comment by harleygirl
    on 1.1.17 at 12.30 pm
    1. The type of loan you are applying for will determine the waiting period. FHA is going to consider the BK and the subsequent short sale, or deed in lieu as two separate events, with two separate waiting periods. FHA requires a 2 year wait from the BK, and then a 3 year waiting period from a foreclosure, short sale, or deed in lieu of foreclosure.

      Your “quickest” path to buying a new home is using a conventional mortgage. You would be eligible once your name has been removed from title. The waiting period is 4 years from the discharge of the bankruptcy, and you don’t have to count the short sale, deed in lieu or foreclosure as long as the mortgage debt was discharged through bankruptcy.

      You may have challenges finding a lender that understands these guidelines, so keep my information handy. I can introduce you to someone that has experience with this and can help once you’re off title.

      Hope this helps?

      comment by Scott Schang
      on 1.1.17 at 2.38 pm
  32. Hi Scott had a question for you sir… I filed chaipter 7 bankrupcy back in 2010 at that time I had a house that was facing foreclosure and due to the cost to upkeep the home I moved out and it was listed in my bankrupcy… Fast forward to now recently I started receiving a tax bill for the property and upon researching I found that the bank never went through with the foreclosure they dropped it and actually marked the house debt as satisfied and left it in my name. I talked to my lawer and he said not to worry they can not come after me for the taxes now accumulating on the property. Now I am currently trying to get pre approval for a loan for a new house and was told that possibly according to fha laws the property has to be out of my name for three years before I can be eligible to buy a new house but the house was never fully foreclosed on and it has a free and clear title so I’m confused… Can you give me any insight on this? Btw the old house is uninhabitable

    comment by Carl P Mayfield
    on 12.23.16 at 9.47 am
    1. Hi Carl, you said something that is very important – you said “it has a free and clear title”. This would mean that you are not on title, or there are no liens against the property. If your name is on title, but there are no liens, you would be ok to use FHA or Conventional financing.

      I believe the case to be that the mortgage debt was discharged in the bankruptcy, is not showing up on your credit, however the lien still exists from the lender.

      If you shoot me the address to the property to my email at [email protected], I will try to look up public records to determine which of these scenarios is true.

      If your name is still on title, and lien(s) still exist from the mortgage that was discharged in the bankruptcy, then you need to take steps to get the bank to remove that lien through either foreclosure, deed in lieu of foreclosure, or short sale.

      Hope this helps?

      comment by Scott Schang
      on 12.23.16 at 10.19 am
      1. There are no liens or nothing on that title or address anymore it’s just in my name and sitting there broken and vacant so that was why I was confused why the bank was saying if it was in the bankruptcy they count it as a foreclosure and my name needs to be off of the title for 3 years before I could go for a fha loan which didn’t make sense to me… The bank is doing a manual underwriting of the loan now hopefully it will be approved.

        comment by Carl P Mayfield
        on 12.23.16 at 10.41 am
        1. I only know of one lender that has been able to approve someone in your situation for a Conventional mortgage. There is no way that FHA will do it. Please do not spend any money on this loan. No application fees, no appraisals or inspections.

          I don’t think this lender has experience with this type of scenario if they are trying to manually underwrite a FHA loan at this point.

          If they can do this, please forward me their information. They would be the only lender I know in the Country that can do that loan using FHA.

          comment by Scott Schang
          on 12.23.16 at 3.00 pm
  33. Hi Scott I filed a chapter 7. I bought my house for $173,000 it’s worth $150,000. I took a second loan for kitchen repair I owe $16,000 on that. I’m still paying my mortgage on time. My question is since both was discharged do I still have to pay on the home equity loan $16,000. Live in NJ

    comment by CONDA G
    on 12.22.16 at 5.38 am
    1. Hi Conda, by including your mortgage(s) in bankruptcy, the creditor is prevented from attempting to collect on any delinquent or defaulted debt, but that doesn’t make the debt go away. You are still responsible for the debt, you just cannot be held accountable in the event of default.

      That second loan means that there is a lien against your property that will not be removed until the second lien holder is satisfied, and they remove the lien.

      If you plan to stay in the home, and wish to access your equity at any time in the future, you basically have two options. Continue to pay the second, or negotiate a payoff for less than the amount owed in exchange for the removal of the lien.

      Here’s an example of a scenario you would never want to happen. If you stop paying on the second, but keep your payments up on the first mortgage, and let’s say years go by and your home is now worth much more than what you owe between the two loans.

      In this scenario, the second lien holder can come back, years after you stopped making payment, and initiate foreclosure proceedings against you, and force you to pay them in full, or take the home through foreclosure.

      I know this is not a simple answer, I apologize, it’s not a simple question. I guess at the end of the day, it really just depends on whether or not you want to continue to live in the home. If you do, continue to pay the second, or negotiate with them to settle, and remove the lien.

      Hope this helps?

      comment by Scott Schang
      on 12.22.16 at 7.53 am
      1. Ok thanks . So if I decide to leave and sign the deed back over to the bank. Then I can walk away without paying on both mortgages. But I have to wait a certain amount of time before I can reapply for a new mortgage?

        comment by CONDA G
        on 12.22.16 at 8.34 am
        1. Yes, if you have your name removed from title through foreclosure, short sale or deed in lieu of foreclosure, they cannot come after you and it will not show up on your credit report. Only the BK will show on your credit report. The mortgages have stopped reporting since discharge.

          The waiting periods for buying again depend on the type of financing you are using. As long as the mortgage on the home now is NOT an FHA mortgage, you can buy in 3 years from the date your name is removed from title.

          Using Conventional financing, you would be eligible in 4 years from the discharge of the bankruptcy.

          If you are eligible for VA financing, you would be able to buy in 2 years from the date your name was removed from title.

          comment by Scott Schang
          on 12.22.16 at 9.15 am
  34. if my mortgage loan was discharged in bankruptcy, can the bank still buy my house at the judicial sale auction with a credit bid based on that loan?

    comment by kevinjohn
    on 12.5.16 at 10.07 pm
    1. Thank you for your question. I am located in California, and am not familiar with judicial sale auction laws. I can tell you that if you discharged the mortgage through bankruptcy, then subsequently defaulted on the mortgage (stopped making payments), the lender has the right to initiate foreclosure proceedings.

      Your specific question may need to be asked of a local real estate attorney. Sorry I cannot offer a better response to your question, I hope this helps?

      comment by Scott Schang
      on 12.6.16 at 8.24 am
  35. vaneverygina Did you also file bankruptcy on the mortgage?  Or does it still report on your credit?  If you keep the home, and sell it in the future, only the existing lien will be paid with the proceeds.  If you are responsible for the home, I would definitely try to refinance it into your name.  His bankruptcy doesn’t affect your loan, or ownership at all.  It only prevents the lender from pursuing a deficiency judgement, and prevents multiple dings on his credit.
    I feel like I’m not sure if I did a good job answering your questions, does this make sense?

    comment by ScottSchang
    on 11.13.16 at 9.49 am
  36. My ex husband filed bankruptcy on our home we still own together post the divorce.  I am trying to decide whether to let the home go into foreclosure or try and modify the loan to stay in the home.  If I keep the home and modify the loan, he has to sign a quit claim deed for me to modify the loan to my salary only.  If I decide to sell the house down the road, what happens with his bankruptcy on the home?  If I make a profit on the sell, can the debtors collect it to pay his debts off after his chapter 7 bankruptcy?

    comment by vaneverygina
    on 11.13.16 at 7.39 am
  37. Sdf0mgb I am really sorry to hear about your hardship, this is a heartbreaking story.  I am not an attorney, so this is only an “educated” guess, but my experience is that if you include a debt in the bankruptcy, and the judge discharges the debt, then the creditor is unable to attempt to collect, or get a deficiency judgement.
    I think you’re protected under the bankruptcy laws, but I would consult your BK attorney for a professional opinion.  Hope this helps?

    comment by ScottSchang
    on 11.10.16 at 9.51 am
  38. In our divorce decree 6 yrs ago I agree to refinance house and put in my name and we estimated the value of the house (had no appraisal and likely wouldn’t have passed inspection). We took what our balance showed on our mortgage statement and figured out equity(not sure now if the pay off amt would have been the same as the balance). I was to pay him 1/2 equity in house when youngest turned 18 or if I sold the house. Refinanced back to a 30 yr loan hoping I could afford the house this way. Fast forward several years and several threats of foreclosure and depleting a lot of my retirement to catch up on payments etc. and trying to get a loan modification etc. to finally getting a sale date forcing me to file backruptcy to allow more time for my boys and I to get out as we had been there 19 yrs only home they’d ever known. Listed debt on bankruptcy and added money owed to ex for equity in house as I would not be selling for any gain whatsoever as it was not worth anywhere near what we expected. Ex showed up at hearing of creditors but was told he had to get an atty. 2 months later I get a notification that debts have been discharged. Before foreclosure started again a realtor told me about doing a short sale which I did and got zero equity on a house I paid dearly for 19 years. My ex is now filing a motion saying im in contempt of divorce agreement. I have no home, no car, live with a friend and drive their extra car. What is going to happen to me? If they tell me I owe this how can I pay it if I do not have it and have lost so much out of 401k that I can’t even take anymore out. Keep in mind all of this was on the heels of his child support going up after I had agreed to him paying less than standard guidelines for many years.

    comment by Sdf0mgb
    on 11.10.16 at 9.17 am
  39. MichelleThorntonEllis This is a very common misunderstanding, and maybe a lapse in education about what it means to include a mortgage in bankruptcy.  The lien(s) will stay until the loan is paid in full, or lost through foreclosure, short sale, or deed in lieu of foreclosure.  Bankruptcy will only protect you against any taxable event, and prevents a creditor from pursuing you for collection in the event that you should ever default on the loan.  The mortgage does not go away, and the liens remain against the home.
    If you have been current on both mortgages since the bankruptcy, you could have refinanced with no problem.

    comment by ScottSchang
    on 11.9.16 at 6.11 pm
  40. Hi! I have a situation that seems precarious to most people but it really isn’t in this day and age and need some clarity in it. In 2005, we filed a ch 13 bk and in 2009, it was converted to a ch 7. We never reaffirmed our first or second mortgage. The second mortgage was one of those bait and switcheroos from 2004 by Citifinancial and we stopped paying on it after 2009, when they wouldn’t send us any information about where or whom our payments were going. FF to 2016- all remnants of the bk are off our credit and my husband has about a 650 on his credit score. We tried to refinance our home and there was a lien on it from Shellpoint Mortgage Servicer- actually it’s Carval who owns the lien- SP is servicing it. They sent us a settlement last year and we tried to settle but waited too long and they said it was no longer any good. We want the lien removed. We asked for another settlement and they said we have to send them in all our financial information to see if we can qualify for anything else. Hellooo this was discharged in a BK and all that’s left is the lien that we can technically walk away from if we stop paying the mortgage. We are concerned about what the girl at SP told us today- She said that we will always have the lien. Correct me if I am wrong- WE WALK AWAY WE DONT HAVE A LIEN ANYMORE, right? Please advise! Thank you U0001f60a

    comment by MichelleThorntonEllis
    on 11.9.16 at 5.49 pm
  41. Hi Scott, my father and I own a duplex together. Three years ago, we were financially struggling and we were able to modify the loan. The modification was a balloon payment through HUD, with terms that states that the owners need to keep this as a primary residence through the term of the loan. 6 months ago, my father moved out. I didn’t rent out his portion because when I called HUD, they said that I can’t. I have recently found out that my father had filed chapter 7 and did not reaffirm his debt. He offered to quit claim the house over to me. I have money in my account that can bring me current but I want to be sure that he can legally quit claim the house over to me and that HUD won’t come after me for the full payment of the loan if my father isn’t living here. Also, if my father can’t legally quit claim or if HUD does not okay my father having moved out, what is the possibility of me being able to short sale over foreclosure? Thanks so much!

    comment by Meckley
    on 11.8.16 at 10.38 am
  42. Thank you so very much for all of your help over the last few years.

    comment by annasmamma
    on 11.1.16 at 7.02 pm
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