BK 7 2nd Mortgage

[ihatearizona]

What is the name of your state? Arizona

After reading an earlier post about cross collateral I checked the documents for our 2nd mortgage. We had an auto loan, credit card, checking account and 2nd mortgage all with the same lender (I know stupid, stupid, stupid!).

Anyway, after reading the document I noted two things that have raised my concerns:

1. Right to Set Off. The loan docs state that they have the right to set off any of our other accounts if we default on our 2nd mortgage. We are completely up to date with all the payments but I'm concerned if they can use this right to set off to increase the amount owed on our mortgage from the other accounts that we have included in our bankruptcy (ie: Auto loan - we returned the vehicle to the bank in Jan - balance $3500.00, Credit card - balance $1500.00 - Checking account - $207.00).

2. Under the terms of default for our 2nd Mortgage there is a clause stating that if we file for bankruptcy that we will be considered in default. I hadn't planned on entering a reaffirmation agreement with them due to the fact that Arizona does not require them. What can they legally do to us when we file and is there anything that we can do to protect ourselves?

Thank you in advance for your help on this matter!

 

[Ladynred]

The right to a set-off generally means if you have any cash in the same bank, they can and will take that money and apply it to your loan, cc, whatever. I don't believe they can take from one loan and add to another.

What can they do to you if you don't reaffirm ?? Probably not a darn thing.

Is this a regular bank or a credit union ?

 

[ihatearizona]

Wells Fargo has 2nd. B of A has 1st

Wells Fargo has our second and B of A has our 1st.

Are banks easier to deal with when it comes to bankruptcy than credit unions?

What about that default if we file bankruptcy clause? Will we lose our home?

 

[Ladynred]

Cross-collateralization is a trick used by credit unions, most banks don't use such clauses. You probably have nothing to worry about except their right to set-off if you have any cash in the banks - so take it out before you file and open a new account somewhere else.

Do the loan papers carry the 'default' clause for bankruptcy ? Technically they may consider you in default, but in reality, they don't want the house, they want the money. If you keep making the payments, its unlikely they'll make any move to take the house in forclosure.

 

[ihatearizona]

On the back of one page of our loan documents is the paragraph indicating reasons for default. Filing bankruptcy is listed.

 

[Ladynred]

Well, like I said, as long as you keep paying them, they should be happy and leave you alone. They don't want the house.. they want the money.