Legal Question in Bankruptcy in Massachusetts

Yes, a Chapter 7 bankruptcy does not stop a second mortgage holder from foreclosing even if there is no equity.

If you had filed a Chapter 13 bankruptcy, the plan in that bankruptcy specifically said that the second mortgage would be treated as an unsecured claim, and you completed all Chapter 13 payments and received a Chapter 13 disharge, then the answer would be no.

There are two untested legal arguments that say (1) you can reopen your Chapter 7 case and get the same results as if you had filed Chapter 13 but without making the payments (this is a minority ruling, most recently in the Eastern District of New York in 2009), and (2) you can file a new Chapter 13 case, complete its payments, and get the same result based on your Chapter 7 discharge.

"Untested" means to expect about $5,000 of legal fees without knowing the outcome.

I'm curious why you didn't ask your own attorney this question. Perhaps you wouldn't mind contacting me directly at [email protected], thanks.

You only need to make the payments if you want to keep the house. If you fail to make the payments the 2nd mortgagee's only recourse is to foreclose if the loan was included with your Chapter 7 discharge. Whether the 2nd mortgagee will forclose with negative equity is unknown.

Feel free to contact me. [email protected]