Is 3rd Mortgage Dismissable

Question:
I have a 3rd mortgage that I've had for 4 years. I called a couple of months ago to see if I could refinance it and lower the payment. The person I was talking to said I wasn't eligable due to the market value of my house. Basically, between just the 1st and 2nd mortgages there is a negative 13K equity. So, can the 3rd mortgage foreclose?

Answer:
I don't know how your state works or whether it's different for a Chapter 7, but here in NJ in a Chapter 13 if you have even $1.00 worth of equity in the house, you cannot have the second mortgage "stripped down". You have to keep paying it if you want to keep your house (the fact that even a portion of it would end up as "unsecured" does not alter the fact that you will still be responsible for the full amount). The third mortgage will be suspended, and after the discharge of a Chapter 13, it will be deleted (stripped down) and written off. However, in a Chapter 7, we were told we have to give up our house if we couldn't keep paying on all three loans. The strip or cram down of the third mortgage is not allowed in a Chapter 7. Paying all 3 would be impossible and very financially unsound for us given the terrible interest rates. Like you, we couldn't refinance due to the loan totals being far more then the worth of the property. BTW, our house is "upside-down" over $25000. This is why you need to have a serious discussion with an attorney and decide what course of action will be best for you and your family. If you cannot do a Chapter 13, you may have to relinquish your house if you can't keep paying all 3 mortgages, plus trustee payments which will be distributed to your creditors. I hope I am wrong and someone (especially Mr. Weiss) will jump in and correct me. No one wants to hear they have to go into foreclosure. Remember that if you go Chapter 13, at the end of it you will still have to keep paying your remaining mortgages. If you are still having financial hardship, this could start a vicious cycle of having to file again a few years down the line, not a good thing and something to avoid at all costs. Please get legal advice and keep us posted on what happens. Good luck.





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