Question: After chapter 7 discharge & not paying the 2nd mortgage, what am I responsible to pay, to get rid of 2nd mortgage lien? If I stop paying the home equity loan after my mortgages were discharged in my chapter 7, and continue to pay the first mortgage to keep the house, I’m pretty sure the 2nd mortgage will place a lien on my property. When I want to sell, my house 10 years from now, how much must I pay to the Home Equity loan people to get rid of the lien? Am I responsible for the amount not payed or the principle plus all the interest that I never payed for the last 10 years? (The loans were discharged so would I be responsible for all the interest too?)
Answer: A second mortgage does not need to place a lien on your property. By being a “mortgage” it already has a security interest in the property which is not impacted by the ch. 7 filing. If you wanted to get rid of the second mortgage, you needed to file ch. 13, not ch. 7. Under the right circumstances, Ch. 13 can strip a second mortgage or home equity loan off of your residence. Ch. 7 can only discharge your personal liability for the second mortgage note. It cannot affect the security interest in the property.