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Filed Chapter 7
Mark Cappel
UpdatedMar 1, 2024

We filed Chapter 7 last year and the case was discharged, but now we have more debts!

We filed Chapter 7 last year and the case was discharged, but now we have more debts! Because we could not afford a lawyer, we did not know to add the mortgages to the Ch7 since we had every intention of continuing paying monthly. Our first mortgage company petitioned to be added and was, so the main mortgage was included. However, we failed to include the second mortgage(equity line) in the CH7. We have not missed any payments on the second, but are unable to pay the first mortgage. Both of us are unemployed right now and only one of us is receiving unemployment insurance. All other utilities are current, so the only thing we aren\'t able to pay is the first mortgage. What should we do? If we foreclose on the first, are we still liable to the second? Can we go back and petition the court to include the second since we didn\'t really know what we were doing (no lawyer)? Thank you for your help.

I am sorry to hear about the financial difficulties you and your spouse are experiencing. Unfortunately, our recent economic downturn has resulted in a large number or layoffs, placing many Americans in a similar position. I wish that I could provide you with specific advice about how to proceed in trying to resolve your mortgage debt, but I do not know enough about your financial circumstances to tell you what action would be best for your family. I strongly advise you to consult with an experienced bankruptcy attorney licensed in your state to discuss your situation and to find out what assistance he/she can provide. An attorney should be able to help you determine whether or not you would be liable for the second mortgage in the case of foreclosure, and if you are liable, what steps you can take to resolve the debt. I understand that hiring an attorney can be quite expensive, but given the potential costs that could result if you are forced to pay these debts, retaining an attorney would be a wise choice. You may be able to find reduced-fee legal services through your local Legal Aid or Legal Services programs. In addition, your state or county bar association’s attorney referral service may be able to refer you to an attorney who will provide reduced cost legal advice.

You may be surprised to learn that even though your first mortgage was included in your bankruptcy filing, you may still be liable for the debt, especially if you have been making payments on the property since you received your bankruptcy discharge. Generally speaking, all debts need to be listed in a bankruptcy filing, including obligations such as mortgages and auto loans. If the debtor does not wish to keep the property, he can surrender the property to the secured creditor, and the debt will be discharged along with other debts. However, many secured creditors will allow debtors to keep secured property in return for a promise by the debtor to honor the terms of the original contract; such an agreement is referred to as “reaffirmation.” For example, a debtor who files for bankruptcy may be able to keep a financed vehicle by contacting his auto finance company and agreeing to continue making his monthly car payments as originally agreed. If you reaffirmed on your first mortgage loan in order to keep the home, it is possible that your bankruptcy discharge did not include your first mortgage loan, meaning you could be liable for any deficiency balance resulting from foreclosure. I do not know enough about your bankruptcy case to tell you whether or not you will be held responsible for your first mortgage loan.

Under some circumstances, a debt can be considered discharged by a debtor’s Chapter 7 discharge even if the obligation was not included in the schedule of debts filed with the court. The court is more likely to allow such a debt to be discharged if the account inadvertently omitted from the bankruptcy schedules. However, the fact that you have been paying on your second mortgage and have continued living in the home makes the situation much more ambiguous. Even if these debts were not included in your original filing, the bankruptcy court may allow you to reopen your previous case to receive a discharge on your mortgage debts. Whether or not the bankruptcy court will allow you to reopen your case and grant a discharge will depend upon many factors, including how long ago it granted your original discharge and if it believes that these debts are causing you and your family an undue financial hardship. I strongly encourage you to consult with an attorney to discuss how these debts could be included in your original bankruptcy filing.

Since you are unable to pay your first mortgage, you may have no choice but to give up your home. You or your attorney should contact your mortgage lender to discuss the options it can offer to mitigate the damage caused by foreclosure. For example, you may be able to conduct a short sale, selling the property for less than the full amount owed on the mortgage. Another option would be to surrender your home under a deed in lieu of foreclosure agreement, allowing you to turn over your property to the lender on amicable terms and thus avoid many of the costs and fees associated with foreclosure. To learn more about foreclosure, I encourage you to visit the foreclosure page at

I wish you the best of luck in finding a solution to your financial difficulties, and hope that the information I have provided helps you Find. Learn. Save.



Debt statistics

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Auto loan debt was $1.607 trillion and credit card was $1.129 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

Collection and delinquency rates vary by state. For example, in Utah, 13% have student loan debt. Of those holding student loan debt, 7% are in default. Auto/retail loan delinquency rate is 2%.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.