If you have 2 loans on your house and one was entered into the bankruptcy do you have to pay it off if you've sold the house?

Answer 1

I would say "probably." Different states have different laws regarding mortgages, but generally speaking a bankrupcy does not get rid of a mortgage lien on residential real estate in which the debtor or a dependent of the debtor resides in most cases. My guess is that someone in your situation would go to sell the house and find that both mortgages are still recorded against the deed, and no buyer is going to pay the seller unless the seller clears both mortgages to provide a clean title to the buyer, and the only way to clear them (normally) is to pay them. However, in some instances a mortgage can be "stripped" off of real estate in bankruptcy, but the procedure for doing this varies from state to state and only works in very specific circumstances. In Indiana, you can strip a second mortgage IF you file and complete Chapter 13, and IF you can show that the debtor owes more on the first mortgage than the real estate is worth, and IF the debtor files a specific motion to strip the mortgage before the case is closed. This applies to residential real estate in which the debtor or a dependent of the debtor resides. The rules for non-residential real estate are different and I won't go into them. Sometimes, if one can't get enough money from a sale to pay off both mortgages, they can convince one or both mortgage lenders to accept less than they're owed to let the sale go through (called a "short sale"), but you would need to see a real estate attorney in your area to learn more about this. Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person.