Selling home, bankruptcy filed, 1st mortgage assumable, 2nd one not.

I live in Connecticut, and filed for Chapter 7 Bankruptcy as of February 2002, discharged in April. My husband and I separated, and I am considering selling my home. I have a first mortgage which is assumable, but a second mortgage which is not. Both mortgages were included in our bankruptcy filing, the agreement being that as long as we maintained our mortgage payments, we could keep the house. I am presently behind on both mortgages, but could make them current through the sale of various household assets (furniture, etc). I have two questions. My first is, is my first mortgage (obtained through a VA forclosure program) still assumable, even after the bankruptcy? If so, were I to find a buyer who would assume the mortgage, what would become of the second mortgage? My second question is, would it be better for my credit future to sell, or, since we are already discharged, would surrendering the house to the mortgage holders make more sense? Any advice would be greatly appreciated! Thanks!

[HomeGuru]

[quote]Originally posted by lgilbert
[b]I live in Connecticut, and filed for Chapter 7 Bankruptcy as of February 2002, discharged in April. My husband and I separated, and I am considering selling my home. I have a first mortgage which is assumable, but a second mortgage which is not. Both mortgages were included in our bankruptcy filing, the agreement being that as long as we maintained our mortgage payments, we could keep the house. I am presently behind on both mortgages, but could make them current through the sale of various household assets (furniture, etc). I have two questions. My first is, is my first mortgage (obtained through a VA forclosure program) still assumable, even after the bankruptcy?

**A: it should be but you would need to review the VA loan program underwriting guidelines etc. as well as your VA loan affirmation agreement to be positive. What is the status, if any, of the Certificate of Eligibility?
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If so, were I to find a buyer who would assume the mortgage, what would become of the second mortgage?
**A: the second mortgage would need to be paid off in cash via Buyer's cash downpayment or Buyer's second mortgage.
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My second question is, would it be better for my credit future to sell, or, since we are already discharged, would surrendering the house to the mortgage holders make more sense? Any advice would be greatly appreciated! Thanks!

**A: based on your finanical situation at the present time, your best option would be to sell the property provided you have sufficient equity. If there is no equity in the property and you would be "upside down" on a sale, talk to your 2 lenders about a short sale or deed-in-lieu of foreclosure.
Generally speaking, it is quite difficult to obtain consent to do either because of the 2 mortgages.
In your case, both lenders must agree.