Legal Question in Bankruptcy in Massachusetts

I have a strange situation. My house was about to be forclosed on by Chase bank. Chase called my wife and I and said that if we sell the house on a short sale they have an incentive program which they would pay us $20,000 if it sells (which it did). my wife filed bankruptcy on the mortgage and there was a second through Direct Federal. to make a long story short. Direct federal will not sign the HUD to release the second mortgage. They said in an email that they would sign the hud only if we passed the $20,000 on to them.

My bankrupcy lawyer told me this was illegal because the debt was already discharged and direct Federal cannot attempt to collect it. They would rather see the house forclosed on and nobody gets anything. is this some kind of extortion. could I sue and if so how much would be appropriate. Thank you

Ben Currier


Asked on 3/26/12, 1:23 pm

2 Answers from Attorneys
Richard Ravosa Law Offices of Richard S. Ravosa

The debt may have been discharged, but, it is the mortgage which pledges the title to secure the loan. Your second lender still has the mortgage on the title, Bankruptcy, without the use of special mechanisms of the Bankruptcy Code cannot change the title. Without the release of said second mortgage, no conventional sale can take place.

Your Bankruptcy Attorney was referring to the note, which is the written promise to pay the lender. This is dischargeable via the Bankruptcy, which means you do not owe the money, if your lender forecloses, they cannot collect any deficiencies.

Is it illegal, that is debatable, is it unfair or deceptive, possibility. Would an attorney take it on contingency unlikely.

Typically in these situations, either your attorney and/or the first lender negotiates with the second lender for a specific amount to release the mortgage to complete the transaction.

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Answered on 3/27/12, 5:32 am
L. Jed Berliner Berliner Law Firm

I'll go even further. I think it's legal. I'd challenge your attorney to put up or shut up - if he thinks it's illegal then he can ask for sanctions for you plus get paid for his/her time.

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Answered on 3/25/13, 1:46 pm


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