Loans

A discharge of a debt in bankruptcy does not mean the debt is paid.

Secured debts such as a vehicle do not get discharged in BK. The loan has to be reaffirmed, paid as agreed or settled according to the terms of the lender.

If none of the above apply, the credit union is still a lien holder on the title and the title will not be cleared until that is done.

If the loan was reaffirmed and paid according to the terms the credit union has to release the title within a reasonable amount of time. The time limit depends upon how long it takes the payoff transaction to be finalized, for example a check or money order clearing, and so forth.

Exception when lender may not release the title: Cross-collateralization!

This is a term used when the collateral for one loan is also used as collateral for another loan. If a person has borrowed from the same bank a home loan secured by the house, a car loan secured by the car, and so on, these assets can be used as cross-collaterals for all the loans. If the person pays off the car loan and wants to sell the car, the bank may veto the deal because the car is still used to secure the home loan and other loans. Technically, cross-collateralization expires when the borrower has no outstanding loans with the bank. In the context of bankruptcy, cross-collateralization also means the collateralization of general unsecured prepetition debt by collateral securing post-petition loans.

Another example of cross-collateralization is when an individual may have a checking account and a loan at the same bank. If the individual becomes past due on the loan, the financial institution may take money out of the bank account or freeze the account until the loan becomes current.

All mortgages are eliminated in foreclosure.

The position of the the mortgage - which is virtually always determined by who recorded their lien first - determines the order of who gets paid the money received by the successful bidder at the foreclosure auction.

The amount of the debt (which includes the unpaid principal, back payments, interest, late fee's, costs of collection/foreclosing, etc) of the one in 1st position gets the money up to the amount owed. If there is any additional amount received by the sale, it is dispersed down the list until all are paid, and any remaining is then given to the one who lost the property. The foreclosure records would show who received the funds...although this is not the type of thing most lenders wouldn't reveal and account for...when demanding any remaining amounts from you.

If not enough money was generated to pay off a lender in full, the lender can (and generally do) seek other methods (garnishment, etc) to recover whatever their loss is...the debt is not forgiven...only the original collateral on it is no longer available.

**I Disagree.** Not in Missouri. A 2nd mortgage foreclosure sale event does not directly affect the 1st which remains a lien against the real estate. (Larry)

But, for tax or financial book keeping purposes, you can only write off, that is take as a loss - make it as as if the business event didn't happen - a recievable (interest or otherwise), that you had already reported as income. Which sort of makes sense if you think about it. (So for a normal person or small business, the interest you may have received in future years, and reported and paid tax, etc on then, cannot be written off or taken as a loss before then).

That depends upon what you want to say. You may wish to tell them that since your income has become smaller, you will have to make smaller payments, and you hope that this will not be a problem for the mortgage company. Or, you may tell them that you can no longer afford to make payments at this time, but if they give you more time, you may be able to resume payments at some future date. Or you might say that you can no longer make payments and will never be able to make any further payments on the property in question, therefore the mortgage company will have to repossess it.

The above was submitted by erasing all previous replies, which is generally improper in this format. I would also disagree with much of it. And telling them they will have to repossess makes that action faster and surer than suggesting a "deed in lieu of foreclosure" resolution.

The below are some of the previous responses reposted:

The best option is to contact the lender directly and discuss what options may be available before the mortgage goes into default. Lenders will not bother reading a letter if the borrower does not contact them directly first.

However, acknowleging you had problems and that you -have- a plan to resolve them, and have done things to assure it won't happen again...but require a little understanding from them to make things right....and explaining exactly what steps you'd like to take to resolve it, and stressing why the plan - will work - then saying exactly what they can do ...so in the end they ultimately get completely repaid, that will have some great meaning.

A letter of hardship for loan modification is essentially your best prospect to give explanation to the lender, the conditions that led you to be in arrears on your mortgage.

It is crucial to be precise, clear-cut, and truthful while writing the hardship letter. Sugar-coating your situation is not recommendable.