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After Bankruptcy

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29

Oct 2012

After Bankruptcy: Why did Bank of America Forgive My Second Mortgage?

Posted by / in After Bankruptcy, General Information About Bankruptcy Law / 51 comments

Lots of people, in current or recent bankruptcy, are getting letters from Bank of America forgiving their second mortgages.

What’s going on?

Here’s the story.  Bank of America, during the financial crisis, lent a lot of money to Countrywide, the giant mortgage lender.   When it looked like Countrywide would collapse anyway, Bank of America took over the whole company.

Now, because Countrywide pulled some shady tricks during the mortgage boom, Bank of America has to settle up for Countrywide’s shenanigans.  Specifically, Bank of America has agreed to forgive $10 billion in mortgage loans.

After bankruptcy, homeowners celebrate Bank of America forgiving second mortgages.

Obviously Bank of America doesn’t want to forgive the loans of people who are paying them–they are a bank after all–they lend money at interest hoping to get more back.  So they are mostly forgiving loans that people are not paying and loans that people have already filed bankruptcy on.

Is that any help?  Well, some.

Many of my clients filed Chapter 7 bankruptcy, stayed in the house and just stopped paying the second mortgage.  That’s my “nerves of steel” strategy.   Those people planned to stay in the house for several more years–knowing they might never have any equity because the second mortgage was still there, just getting further behind.  They were happy just to stay in the house.  Now, with the second mortgage forgiven, those folks can hope to have equity–maybe soon.

Some people file Chapter 13 bankruptcy in order to remove the second mortgage from their house.  Those people wanted to know that when the chapter 13 plan was completed, the second mortgage would be gone–they wanted to be sure they’d have equity some day.  Now the second mortgage is gone instantly.  What should they do?  See if there’s an early exit from Chapter 13.  Is it possible to convert to chapter 7?  There may be income eligibility issues that need to be looked at closely.  Maybe drop out of bankruptcy altogether–if the credit cards and other debts aren’t much.

Do people have to pay debt forgiveness taxes when these second mortgages are forgiven?

Not if you filed bankruptcy.  There no debt forgiveness tax on debts wiped out by bankruptcy.

 

PS  August 2014.  One of my bankruptcy clients from 2010 brought me a second mortgage forgiveness letter from Suntrust.  You can see it here.  Same pattern.  After the 2010 bankruptcy, this had gone unpaid for four years.  And the house is probably $80,000 still underwater from the first mortgage.  So the bank is getting gold starts for helping the consumer by forgiving a debt they were never going to get paid on, anyway.

I would bet that if my client had kept sending in the monthly payment after the bankruptcy, SunTrust would NOT have forgiven that loan.

 

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Robert Weed has helped twelve thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.

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51 comments
  • Robert Weed

    October 29, 2012, pm31 6:41 PM
    01

    For more on the Countrywide shenanigans, check this article from the New York Times. http://dealbook.nytimes.com/2012/10/24/federal-prosecutors-sue-bank-of-america-over-mortgage-program/

    Countrywide was really running two separate rackets. They tricked consumers into taking loans that there was no way they could afford. (That’s why they now have to pay back that $10 billion.)

    And they turned around a claimed those were strong, safe loans, and sold them on to Freddie Mac and Fannie Mae, who then had to be bailed out by the taxpayers. (That’s what they are being prosecuted for now.)

    Notice that the American people picked up the tab, eventually, on both ends.

  • Bill Idiot

    December 18, 2012, pm31 3:03 PM
    02

    What about people with with first mortgages from country widw that were also taken over by bank of america. My poor father 89 years old has one that take his whole monthly ss check for the monthly payment

    • Robert Weed

      December 23, 2012, pm31 2:53 PM
      03

      Bill:

      It would be nice if they forgive loans based on what people needed it. But they mostly forgive loans they know are never going to get paid anyway.

      Here’s an article from the New York Times that explains they were supposed to “modify” loans to keep people in their homes. But they mostly forgive seconds that aren’t being paid anyway. So they really aren’t giving up anything. http://www.nytimes.com/2013/02/18/opinion/the-second-mortgage-shell-game.html?pagewanted=all&_r=0

  • steve

    December 24, 2012, pm31 7:21 PM
    04

    Robert, are you seeing Chase canceling/forgiving 2nd TD for similar reasons? (Washington Mutual old loans)

    • Robert Weed

      December 25, 2012, am31 8:33 AM
      05

      Steve:

      Less. Bank of America agreed to specific targets as part of the settlement.

      PS One of my clients just emailed me today that Chase had forgiven his second mortgage.

  • Robert Weed

    Robert Weed

    December 28, 2012, am31 9:41 AM
    06

    I should add that I have started to see several of these from Chase, too.

  • Ulysses Gladden

    January 30, 2013, pm31 10:25 PM
    07

    Mr. Weed I am in the state of Ga. and currently in bankruptcy. B.O.A. just recently forgave our 2nd. mortgage . However our bankruptcy is still in progress(ch. 13) Are we not protected from this cash out by the bank while we are still under B.R. Protection? One of the benefit of 13 was the dropping of the 2nd. mortgage. Are we now liable for the tax on the amount dropped by the bank? This is not something that our lawyer discussed with us.

    • Robert Weed

      January 31, 2013, am31 6:21 AM
      08

      Ulysses:

      Taxes should not be a problem. For mortgages on your home, Congress extended the tax holiday on mortgage debt forgiveness through the end of 2013. “Talk to your tax adviser.”

      You may want to talk to your lawyer about possibly dropping out of chapter 13. MAYBE you could switch to Chapter 7, or just get out of bankruptcy, now that the second mortgage is gone. (A lot of different factors would go into that decision, but you should ask.)

  • siska aprilia

    February 15, 2013, pm28 1:52 PM
    09

    Mr. Weed, my second mortgage just now got a hold of me 3 years after my house foreclosed and demanding a pay off of $53,000. I had thought the first and second mortgage worked it out at the foreclosure, so each can get a percentage, even if both wont be paid in full. I also learned about a mortgage loan assistance program and a 1099-C that can be issued for those who is not able to pay off their mortgage debt in full, but my mortgage company does not seem to be aware of that? What is the best way?

    • Robert Weed

      February 15, 2013, pm28 5:29 PM
      10

      Siska:

      Don’t know what state you are in, but in Virginia the second mortgages almost always come after people after a foreclosure and you need to pay them, offer a substantial settlement, or file bankruptcy. You need to talk to a bankruptcy lawyer in your state.

  • Lynn A

    February 23, 2013, pm28 3:56 PM
    11

    I completed my Chapter 13 and Bank of America was my 2nd mortgage holder and was lien stripped. This was filed and the lien released from my property. After this, I got a letter from BOA stating that they are going to forgive my Equity Line of Credit under a federal program and I won’t owe anything. This will be done unless they hear from me within 30 days. The letter was dated 9/19/12. My chapter 13 plan discharged 7/2012 and the paperwork was already taken to the registry of deeds and the lien BOA had was now off my property. I called BOA on 9/21/12 and spoke with April (I was told after she continued to argue about the validity of the lien on my property that I still did indeed owe them the money and that I could not speak with a supervisor as there were no supervisors) and she stated, fine, then my loan won’t be forgiven and now I will still owe it. My house, by the way, was sold and was being closed on one week from this conversation so this was pretty upsetting. I immediately sent a certified letter to them stating what had transpired and demanded they stop bothering people who had taken all the legal steps through bankruptcy (ch 13) and that they can’t forgive a debt that doesn’t exist anymore, and regardless it had been deemed entirely unsecured and they were paid within the terms of the payment plan. Now, I recieve a 1099-C with event code G which means they just stopped trying to collect on the mortgage. I called them (and I swear I spoke with the same nasty person who continued to tell me that just because I filed bankruptcy doesn’t mean I don’t still owe the money, they just can’t bother me for it anymore!!) and demanded a corrected 1099-C. It is my understanding that the event code should be A for bankruptcy at the very least but on top of that I can get no info on whether they can still market this as debt forgien and as a home equity loan since the courts deemed it an unsecured lien that was discharged and stripped prior to BOA stating they would “forgive” the loan. Needless to say, they have not corrected the 1099-C. Anyway advise on how to proceed would be great since I can’t file my taxes until I know what to do with this erroneous 1099-C.

    Thanks

  • Danielle

    April 1, 2013, pm30 6:38 PM
    13

    Have you seen any from Suntrust? My 2nd is through them and is supposed to be stripped in my bankruptcy, this outstanding item is the only item stopping me from requesting an early exit from the bankruptcy.

    • Robert Weed

      April 1, 2013, pm30 8:21 PM
      14

      Danielle:

      I’d be real surprised to see SunTrust do anything like that. Bank of America is doing so much of this because they, foolishly, bought out countrywide and now are stuck making nice because of all the bad things Countrywide did. SunTrust doesn’t have that incentive.

  • Janna

    April 22, 2013, am30 10:46 AM
    15

    My loan was not with Countrywide, it was with Bank of America. When I spoke to representatives it was always with them and their name was on everything from the beginning. We, too, were given a loan that we couldn’t actually afford. The home itself should not have legally passed an inspection. We were still naive and had never purchased a home nor did we know what to look for or what we were really getting ourselves into by purchasing this particular home. We were told that the loan we had applied for was days from being “no longer available” as they were discontinuing it, so out of fear that we would not be able to buy a home, we purchased the first home we found. We felt pressured. We are currently three and a half years off of discharge and have been working very hard to rebuild our credit. We had to dispute BoA on our credit reports as they never reported our bankruptcy. Yes, our credit reports showed, up until last month, that we were 3 years behind on our mortgage!! They have forgiven the second mortgage at this point (it, too, was discharged in the Chapter 7 when we surrendered the home.), but that is not currently my problem with them. Since filing our bankruptcy, my husband finished his bachelor’s degree and took a job out of state. BoA has managed to track us down with every move we have made, but have yet to go through the process of taking our name off of the deed/title to the home. Being that we are in a much better financial situation that is only getting better for us now, we have begun looking into where we need to be in order to try our hand again at purchasing a home. Here is where my issue comes in: Even though we did everything we were supposed to do and took all of the expert advise to rebuild our credit, WE STILL CAN’T GET A LOAN!!! Bank of America has not changed title, and to get a loan, you must be off title for two years. So I am at a loss for what to do now. I cannot convince BoA to speed up the process or to back-date the change of possession. So, it looks as though our moving forward hinges entirely on them!

    • Robert Weed

      April 22, 2013, pm30 3:13 PM
      16

      Janna:

      Right. That’s why I tell people, Don’t Move Out–and if you have to move, Rent It. At least you have some money coming in since they are blocking you from being able to buy again. There’s no remedy that I know of.

  • Ana

    September 9, 2013, am30 3:00 AM
    17

    Mr. Weed, I Know this post is a few months old. However, i would appreciate to have your legal input on our case . After selling our 1st mortage to gtservicing, bank of America With whom we have a second crédit Line mortage to which we have not contributed in the past three years is threatening to foreclose our house even though its value is still less than what we still Owe on the first mortage. 420 000 against 400 000. We are in process of Filling for bankruptcy. Which type of bankruptcy 7 or 13 is more likély to help us eventually write the second mortage off. Thank you for your response. We are in state of California.

  • kap

    September 12, 2013, pm30 5:43 PM
    19

    Mr. Weed, wer are in the final stages of a loan mod/ and significant principal reduction with our 1st BofA (originally Countrywide). This loan was for $1million and did not qualify under some of the mainstream modification programs initially. We were served foreclosure papers by BofA by mistake (they were showing that our home was not our primary residence…at the time SC had stopped any foreclosures on primary residences) . I had an attorney friend fire back some papers to their law office stating that it is our primary and we were never offered under federal law to have an attempt at working out. Next we received paperwork to apply for an in house modification from the law firm representing Bof A. So after a principal reduction of $500K and a lowered interest rate of 2% I feel happy. However, our second mortgage (HELOC) for $266K ( that we stopped paying on and has been written off is still lingering out there.) I tried to see if they would settle for cash but they did not accept. What is your advice on handling the second? I tried to see if Bof A would help to settle it but they will not because they are not the servicer. Not surprising but figured I would try. We are due to sign off on final modification papers in the near future and would love your advice. Thank you!!!

    • Robert Weed

      September 12, 2013, pm30 6:55 PM
      20

      Kap:

      Wow! Looks like you’ve done very good work negotiating what you have done…I don’t have anything to add. It’s really a strategy question not a legal question and you know your situation and seem to be on top of it.

  • denise

    October 5, 2013, am31 6:29 AM
    21

    i live in ky, i have a first with chase who wanted to work with me with deed in lieu.chase.offered 6000 to fifth third on the second and they refused offer …….i dont know what to do, is it possible to do bankruptcy on both and be done with mortgages?

  • Vicki

    October 7, 2013, pm31 11:38 PM
    23

    I am currently in banruptcy and have a loan with Nationstar Mortgage (was with Countrywide and BOA). I was approved for the home affordable program and completed all payments prior to Nationstar taking over the mortgage in June of 2012. Nationstar will not send me any information on what my balance was when it took my loan over, they will not send me a payment slip and they will not communicate with me because they say I am in bankruptcy. They will not communiate with me, sending information on my mortgage so I can start making payments to them, however, they have had no problem communicating to me that they are starting the foreclosure process. I live in Illinois and want to know if there are any laws that will protect me from this company taking my house without giving me information I have asked for many, many times. I appreciate your response!!

    • Robert Weed

      October 9, 2013, pm31 7:42 PM
      24

      Vicky:

      So are you sending your payment? The foreclosure should tell you how much they say you are behind.

      You can also write and ask for the status of your account as a “qualified written request” under RESPA. http://www.consumerfinance.gov/askcfpb/207/what-is-a-qualified-written-request-what-is-a-qwr.html?gclid=CLm5pJrBiroCFWpk7AodOxcAUQ.

      • Vicki

        October 15, 2013, am31 1:23 AM
        25

        I had been asking for the following information for the last 17 months: starting balance, monthly payment, how the payment is applied. They told me that they are not allowed to communicate with me because I am in bankruptcy. So, no, I have not sent a payment because I have not received the information I have asked for. Now they are saying I owe them $28,000. The company has almost 1000 complaints on them. Most complaints say they are unwilling to work with those that have been approved for the HAMP. I think I would tend to agree. It doesn’t take 17 months with multiple phone requests and written requests to get the information I am asking for!

        • Robert Weed

          October 15, 2013, am31 2:52 AM
          26

          You do not have to use the magic words qualified written request for your letter to be a qualified written request. If you wrote and asked the status of your account and they didn’t answer, you should sue them under RESPA.

          • Vicki

            October 18, 2013, am31 1:50 AM
            27

            Thank you very much for your advice!

  • Rebecca Medina

    October 19, 2013, pm31 10:47 PM
    28

    I am looking for any type of assistance, comments . We filed bankruptcy in 2008′ just recently completed 1 mo ago. Discharge papers have been recieved. When we filed bk in 2008 our mortgage co. Was countrywide, then biought out by BOA. One week after our discharge we recieved a certified letter from BOA stating we were 35 payments pays due and we needed to contact them for possible assistance. My husband and I can’t believe this is happening. During the bk we fell behind on our payments again , since I was a full time student. In 2010 we requested assistance from BOA for a loan mod or something. It took them until 3/2012 to give us a special forbearance. During that entire time I called BOA every 4-6 weeks but was told it was still in processing. We did not give a payment for roughly 15 months. I was told to hold off until we recieved a final amount from BOA, since I was behind we didn’t know exactly what needed to be paid and neither did BOA. We have now completed all paperwork requested by boa but we gave been denied fir any assistance. I feel this is not right, we do not want to loose our home, we have made every payment since getting the special forbearnce in 2012 but we are being told the payments are satisfying the oldest payment due. I have lost all confidence in BOA, they tell you everything will be fine but niece we are in the process if possibly loosing our home…

    • Robert Weed

      October 20, 2013, am31 11:16 AM
      29

      Hi Rebecca:

      This “voluntary” loan mod process that the country has gotten itself into is a real mess.

      The first thing I can tell you is, keep applying. Now that your Chapter 13 bankrutpcy is discharged, apply for that loan mod again. And if they send you a new foreclosure notice, file a new Chapter 13.

      Line up a lawyer so you can be ready to do Chapter 13 again. And don’t give up.

      • Rebecca Medina

        October 20, 2013, pm31 6:28 PM
        30

        So I should keep trying to get a loan mod, I didn’t think I could do a bk again, it was just discharged ?? That isn’t the route I want to take but if that is the only option to save my house. It kills me that now I gave completed my education, I am making a good salary but my credit is messed up and it diesnt matter if I can pay or not . Thank you

        • Robert Weed

          October 20, 2013, pm31 6:40 PM
          31

          Rebecca:

          You cannot get another discharge, or maybe not, depending what was in your first Chapter 13, but you can use it again to catch up the house. and stall for time while you try to get your mod approved, again.

          You’re right that it does really mess up your credit.

  • April

    November 5, 2013, am30 3:08 AM
    32

    Any advice would help. My husband and I have been on a crazy roller coaster ride for the last 3 years. We live in Ohio. We filed bankruptcy in 2010. When we filed, our first and second mortgages were current. Our goal was to keep our home when the bankruptcy was over. We filed chapter 7. When we went to court the judge said that our mortgage paperwork was defective and that it could be considered an asset and sold to pay off our debt. We were advised to switch to chapter 13. The plan was that we would have our unsecured debt in the chapter 13. Our first mortgage is with BOA. Due to the defective mortgage paperwork our mortgage was supposed to be avoided (discharged). To make a very long story short…the judge ruled that our BOA mortgage was avoided. BOA argued that the court documents were sent to the wrong address and they did not have a chance to fight our claim so the courts reversed their decision. Instead of working on having the mortgage avoided, the hired attorney settled with the title agency (not BOA) for them to pay off our unsecured debt that we were already paying in our chapter 13 bankruptcy. Once we discovered this we asked our attorney many times if we could walk away from the house when the bankruptcy was over and we were always told yes and that we would not be liable for money owed on the property. Our bankruptcy is almost over (less than 2 months or so). We were thinking of surrendering the house to BOA. When I asked our attorney our options, he said that he did not know if we could still walk away from the house with being sued. He said that he would look into it. I received an update from him and he said that he had a long talk with another br attorney and they strongly feel that BOA is still going to discharge our loan after the bankruptcy is over. He advised us to continue to live in our home, continue to pay on our second mortgage, and that BOA may never contact us regarding the house. He said that the only issue we might have is if we ever go to sell the house that there might be a lean on it. Neither BOA nor their attorneys involved in our case will talk to us or our attorney. Our second mortgage is with 5/3 and we are current on it. We have not made a payment on our BOA mortgage since December 2010. My husband and I want this done and over with, but at the same time it just seems really uncertain. Any suggestions?

    • Robert Weed

      November 5, 2013, am30 10:40 AM
      33

      April:

      Wow. I’ve got a defective first mortgage case here in Virginia that’s dragged on for three years. They are so complicated! There’s no way I can add anything to what your lawyer is telling you.

  • Stephen

    November 9, 2013, pm30 8:37 PM
    34

    Robert,
    I have a 1st and 2nd loan with B of A. The first was HAMP modified . Once the trial payments were complete we receive trial payment on our 2nd . The 1 st mortgage was only modified by about $100.00, not much but the second trial payments were cut to half of what the payments originally were. Unfortunately we could not accept the second modification because we were maxed financially paying the first. B of A new this but would offer no other solution for the 2nd mortgage. So we haven’t paid on the second in 4.5 years with no contact from B of A in over 2 years. In June of 2013 B of A started sending letters that if we didn’t pay they would begin foreclosure. At the time this all began we had job loss and pay reduced so the 2nd could not be paid. I did talk to a B of A rep this week and they stated they could not do a Federal modification because I rejected the mod the first time. I explained for the 100th time why this occurred but we could afford the modified payment now. My house is valued at roughly 350000. I have a 1st for 300,000 and a second for 112000. Do I have any options other then hoping they will modify in house? I’m in California.

    • Robert Weed

      November 9, 2013, pm30 10:58 PM
      35

      Stephen:

      That’s outside of the area I know much about. Since you haven’t paid in a long time, they might be open to a cash settlement, if you have some cash.

      • Stephen

        November 11, 2013, am30 1:30 AM
        36

        Robert,

        Thank you for the reply. Would it be best to speak with a real estate attorney?

        • Robert Weed

          November 11, 2013, pm30 12:36 PM
          37

          You definitely need to talk to somebody who knows more about California than I do. Like I said, this is outside the area that I know much about.

  • Vladi

    November 10, 2013, pm30 3:20 PM
    38

    Greeetings, I live in virginia and have my mortgage through pnc, originally national city mortgage, and my second mortgage through gmac and now OCWEN bought it. I am current on all payments but under water well below the second mortgage. I wanted to settle with the 2nd mortgage company since the home value is so low. Is that possible if you are not behind on either loan. If so can you recommend first steps.

    • Robert Weed

      November 11, 2013, pm30 12:31 PM
      39

      Vladi:

      Sure it’s possible. I don’t think its very likely if you are not behind and have not filed bankruptcy. Beside that, since I’m a bankruptcy lawyer, I don’t have any expertise. Sorry. Most of the people you find who offer to do negotiations are scammers, so you have very careful.

  • kenneth

    December 3, 2013, am31 2:55 AM
    40

    Good evening Mr. weed,
    I am in a big dilemma, my home is up for foreclosure and my mortgage is through BoA. I did file for bankruptcy two years ago but still had a hard time making payments. I have tried to get a home modifications loan but BofA gave me the run around and would not help. When I bought the house I was making payments to Country Wide. Now. With,all of the trouble that I am going through and maybe loosing my home I am at my wits end. What do you know about the courts in New York that is handling case that will show that Country Wide & Bof A did not do the right thing? I did contact an attorney to help,postpone the sell of my home and I would like to know what I would need to do to stay in my home. I know that I can’t refile for bankruptcy since it has been only two years.
    Thanks for any advice.

    • Robert Weed

      December 3, 2013, am31 10:47 AM
      41

      Kenneth:

      Well you can refile bankruptcy–at least if your one two years ago was a Chapter 7, you can legally file a Chapter 13. The chapter 13 would give you three or five years to catch up the house. I don’t know whether you have any hope of doing that. About your other questions, I don’t know anything about New York, sorry.

  • ISFLY

    April 7, 2014, pm30 8:59 PM
    42

    My second with Bank America was forgiven by the DOJ as part of the mortgage settlement relief act in October of 2012 with a letter out of the blue. I had, at one point been 180 days in arrears paying the loan but at the time of forgiveness I was making regular monthly payments. I just went to apply for a new home loan and was told by the lender that I’m ineligible for a loan because the mortgage debt settlement counts as a “short sale” and I won’t be able to get a home loan until after 2014. I’ve spoken with B of A and they say the loan shows paid in full and isn’t considered a short sale by them. Can anyone help me here?

  • Bren

    April 16, 2014, am30 1:03 AM
    44

    My son’s wife, without his knowledge, let their home go into foreclosure. She was taking the payment money and buying drugs that she was addicted to with it. She had gotren to theb pointbof a very exoensive habit. She hid all the letters from him and by the time he found out about it, the house was due to be sold in anout 2 weeks. He didn’t want to lose their home and it was the only home their little son knew. I found out that he could save his home from being sold and get out from under the credit card debt by filing chapter 13, which he did. His wife wanted no part of the whole deal. She didn’t want to live with him in the house anymore. My son assumed she would never come home, since he had found divorce papers she had filed for. His Atty. got the new home loan set up without her name on the mortgage. A very short while after the bankruptcy was completed, she moved back home and stayed for a few months and began doing her old stuff again. Not coming home and running around with other men, so he told her she needed to find another place to live. He plans to file for a divorce against her, since he feels he cannot trust her and she cares nothing abiut him ir their home or their family or their marriage.
    Now, on top of all this, his Atty. called and told him he doesn’t make enough money to qualify for his home loan. After he has been making his payments timely all these months. They want to refer him to someone else. For waht, we don’t know yet as he hasn’t had a neeting with them yet. He’s waitibg until his day off which us next Monday. He paid them almost $1800.00 to file and do the work for him. Can he get his money refunded if they no longer handle his case? Why would the courts accept his plea for bankruptcy and now someone is saying he cannot qualify, months later? And since his wife was only on the original loan, and is not on the new loan and the house is in his name, she obviously should have had to have signed something saying she wanted no part of the house, if he files for divorce, can she take the home from him or force him to sell and give her galf the calue if the home? And what can he do about the mortgage now that the Atty is saying he doesn’t make enough money? I don’t understand how this can happen when everything was all set up, the bank accepted the bankruptcy offer, and he has signed the loan papers, the bankruptcy papers and has been making payments for several months. They were supposed to be finding out this month if they could actually lower his payment with a HAMP loan, but instead told him there was a problem with the entire thing. How could that even be possible when they told him everything was completed with the loan and the bankruptcy. He feels like he is losing everything now. His wife, his home and his son too if he doesn’t have a home for him to live in. Can you help answer any of these questions? Your help will be GREATLY appreciated. Thank you.

    • Robert Weed

      April 16, 2014, pm30 8:36 PM
      45

      Bren:

      Sadly, you can get turned down for loan mod for not making enough money, even if you are making the payments. I’m not sure what to think aobut his “atty” who now wants to refer him to someone else. Is this a bankruptcy attorney, or somebody who was just working the loan mod.

      There are regulations that somebody doing loan mod work is not supposed to charge until they actually get you the mod. I also don’t know how it got set up without the wife if she’s still on the deed to the house.

      I don’t feel like I have a complete picture of what is going on–and I can see that you don’t think you have a complete picture either.

  • Lucki

    June 22, 2014, am30 1:22 AM
    46

    Great article…. My second mortgage was forgiven whilst in a Chapter 13-received recordation of lien release and 1099c. Is it legal for the lender to report the debt as a charge off or settled for less than amount owed? My attorney is not responsive and often tells me that he will file a motion to withdraw when I ask questions. 4 months left in my plan….

    • Robert Weed

      Robert Weed

      June 22, 2014, am30 10:58 AM
      47

      Lucki:

      Your question is not what’s legal for Bank of America to do–they did what they did. The right question is what’s legal for you to do.

      It seems to me you need to send the IRS the form 982 that I talk about in this blog. http://robertweed.com/2010/02/03/bankruptcy-foreclosure-1099-a-and-1099-c/

      You don’t owe the 1099c tax if you were insolvent. There’s a long way to show you were insolvent. And a short way. The short way is proof you were bankrupt.

      I AM NOT A TAX LAWYER. You need to talk to your TAX ADVISOR.

      But I can tell you that trying to change Bank of America doesn’t seem to me to get you anywhere. You just need to file the right form with the IRS.

  • russell

    July 18, 2014, am31 12:46 AM
    48

    Good evening Mr. Weed. This is not a foreclosure situation. I live in Washington DC. I obtained a 1st mortgage (320k) and 2nd mortgage HELOC (40k) through countrywide in 2007. It was sold to B of A in 2009. I am and have always been current on my payments. The loan was a pay option ARM. My loan is part of the Horn settlement (don’t know if you’re familiar with it) class action lawsuit, which claims that B of A was underreporting interest paid by the homeowner to the IRS. Well someone sued and won and now B of A has to reissue all the mortgage interest paid statements from 2010-2012. My 2nd mortgage HELOC started out as 40k in 2007 and is still 40k to this day. I have only been able to make this monthly interest payments for the last seven years. Is there any legal recourse I can pursue to have that 2nd mortgage eliminated since they essentially were found guilty of defective loan processing in a US Court of law? I am in a position to pay off the 2nd mortgage but would love to avoid doing so if could. Thanks for listening and any help would be greatly appreciated!

    • Robert Weed

      Robert Weed

      July 18, 2014, pm31 1:34 PM
      49

      Thanks Russell:

      Sorry that I don’t know anything that would help answer your questions.

  • Mel

    October 28, 2014, am31 3:38 AM
    50

    Thank you for the info. Just received a similar letter from Chase. I filed bankruptcy in 2009 and chase turned me over to a debt collector (five lakes), they called every 3 months or so to see if I wanted to “settle” offering to take 10k on a 20k loan. Each time I would remind them that if I had 10k I would not have filed bankruptcy in the first place Today I recived a letter stating my lien would be release..

    • Robert Weed

      Robert Weed

      October 28, 2014, am31 10:21 AM
      51

      Mel:

      that’s great! thanks for sharing.

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