If you have two mortgages, it is possible for the court to dismiss the second mortgage in a Chapter 7 bankruptcy filing.

Q: My Chapter 7 bankruptcy was discharged this spring. My attorney had me reaffirm my primary mortgage prior to filing the Chapter 7. He said this would be necessary in order to ask the court to dismiss the second mortgage.

The value of the home is much less than the amount owed and there is a second mortgage that increases the debt. Two months later, my attorney told me he forgot to include the reaffirmed mortgage agreement in the chapter 7. He explained that he would file to have the bankruptcy reopened to include the reaffirmed mortgage and after the first mortgage is included, ask the court to dismiss the second mortgage. But he was unable to do that. Now my attorney refuses to call me back. 

I need to know what this means when it comes to my first and second mortgage? Can I get another attorney to reopen the bankruptcy? Is it too late to include the first mortgage reaffirmed agreement and ask the court to dismiss the second? I am a senior citizen who was forced into retirement because of health issues and I live on a pension.  I cannot afford to pay a second mortgage. I have remained current with the first mortgage. I have only been in my home for ten years.

A: When you hire an attorney to assist you in a proceeding you expect him or her to undertake these actions diligently. Unfortunately, people make mistakes, and your attorney clearly made a doozy.

The attorney should take the time to explain the situation to you and walk you through the next steps. If your attorney is not communicating with you, you should seek assistance from someone else.

It’s too difficult for us to judge the particulars of your case to know whether you can reopen the bankruptcy case. A person that deals with personal bankruptcy issues should be able to help you further in your case. But here are some thoughts in general that might help provide additional context.

When you filed for bankruptcy, you had two mortgages on the property. You also had personal liability to repay each of those two mortgages. You could almost view the debt to repay the mortgages and the security the lenders have as two distinct transactions.

On the one hand, you have a personal obligation to pay your debts. On the other hand, the lender has the right to foreclose on the property, sell the property and satisfy the debt owed by you to the bank.

Keep in mind that the seller can go after you personally and sell the home to get the money that it is owed. While in some states, the lender might only be able to go after the home, we have to deal with the situation as if the lender could go after both you personally and the home itself.

In bankruptcy, the court has the right to eliminate your obligation to repay a debt to a lender. But the court usually doesn’t have the right to terminate the lien on the home. If you reaffirm the debt owed to the first lender, you basically say that after bankruptcy you agree to continue to have the obligation to repay the bank personally. If you don’t reaffirm the debt and the bankruptcy court discharges that debt, you would no longer be liable for that debt.

But we emphasize that not having that personal obligation does not eliminate the bank’s ability to foreclose on the home to get whatever it can to reduce the debt owed.

In essence, in the situation you describe, after bankruptcy you would have ended up personally owing the amount to the bank for the first loan and not personally obligated on the second loan. But the two lenders would, or might, still have their lien rights to foreclose on the home due to your failure to pay the amounts owed to these lenders. Unless the bankruptcy court not only discharged the debt, but also eliminated the lien the second lender had on your home, you might still lose the home in foreclosure.

Bankruptcy can be quite technical in its proceedings and solutions. For these reasons, you should talk to a different attorney to see if the process recommended by the first attorney was right for you and then to see if where you have been left off still works for your situation. If there are major issues due to the problems in the missed filings, you will have to assess what to do next with your new attorney. That may include filing a complaint with your state’s attorney discipline committee.