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The Mortgage Debt Is Still Owed After A Bankruptcy

This is a post written by George Souto of Mccue Mortgage.  Many times homeowners are under the impression that bankruptcy wipes the slate clean of mortgage debt - NOT SO.

One of the misconceptions Homeowners as well as even some Real Estate Professionals have is that if a Homeowner goes through bankruptcy, the mortgage is discharged along with all the Homeowner's other debts.  The reason why Homeowners who have gone through bankruptcy a believe this, is because of misinformation they receive from bad Bankruptcy Attorneys.  The truth is that even though the mortgage is listed on the bankruptcy, it is NOT included in the discharged debts.  This means The Mortgage Debt Is Still Owed After A Bankruptcy.

There are two main reasons why Homeowners believe their mortgage has been discharged in the bankruptcy along with their other debts.  I have already mentioned the first, misinformation from bad Bankruptcy Attorneys.  The second is because the mortgage stops being reported by the Lender after the bankruptcy, and is reported with a "0" balance on their Credit Report after the bankruptcy is discharged.  As a result of the mortgage showing up with a "0" balance on the Credit Report, the Homeowner believes the Attorney got everything discharged including the mortgage.  They further believe the reason why they are still making payments on the mortgage to the Lender, is so the Lender will continue to let them stay in the property.

What actually happens to the mortgage during a bankruptcy is this.  The mortgage has to be listed with all the other debts, however, it is not discharged as well as any government loans like student loans.  Unlike the other debts listed on the bankruptcy the Lender is only required to stop reporting the debt and requiring payment.  BUT the debt is not eliminated unless the Homeowner sells the property, refinances the property, OR the Lender forecloses on the Homeowner for lack of payment after the bankruptcy.  The Lender is prohibited by the court from reporting the debt, BUT the debt remains.

This can be confusing, and difficult to understand.  However, the confusion could be eliminated if the courts allowed the Lender to continue to report the mortgage after the discharge.  If the debts were allowed to be reported Homeowners would not have this false sense of security that they are no longer liable for the mortgage. 

Regardless of what a Homeowner is told at the time of a bankruptcy by their Attorney, The Mortgage Debt Is Still Owed After A Bankruptcy.   The full amount of the remaining mortgage balance is still owed until the Homeowner either sells the property, refinances the property, OR the Lender forecloses on the property.

 

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

 

 

 

SHAHAR MANAGEMENT

 

Debbie Walsh, GRI, CNE, CHMS, REM | Office (845) 283-3036 |

website www.viewhudsonvalleyhome.com | search for homes

If you are Buying, Selling or Relocating to the Hudson Valley area and need help from a professional REALTOR®, I would be happy to assist you! Please visit my Hudson Valley website for property searches and to sign up for free listing alerts and other information.

 

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WINNER 2015, 2016 & 2017 Hudson
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Comment balloon 5 commentsDebbie Walsh • July 22 2014 12:04PM
The Mortgage Debt Is Still Owed After A Bankruptcy
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