Ideas on Negotiating Out of Second Mortgage

[Mathew Thadeus]

My question involves a foreclosure in the State of: Colorado

I recently went through Chapter 7 due to a business failure. I could not fit into a Chapter 13 since I had too much secured debt. So I did not get a lien strip.

Now I am trying to negotiate down and pay off my second. The house is worth about $720,000 and still going down. The 1st is $740,000 and the Second is $340k. The first is with ASC and the 2nd is with BoA. I am not in a BoA class action settlement state.

I have been able to land a good job and I can afford to pay my 1st. However, I cannot afford to pay on the 2nd. I also do not see any scenario where paying off $340K more than my property is worth is ever going to make financial sense.

I would like to get BoA to settle for 10-20 cents on the dollar since the house is upside down and they cannot collect on a default judgment.

My fear is that BoA will just put my loan on file and come back 5 years from now when the property is worth something again.

I know this is a hard sell to the bank. Any suggestions on how to present this or negotiate this?

1) Can an attorney help me with the negotiation?
2) How do I find a good one, most seem to be paper mills?
3) Would it help to have the attorney assist with a forensic audit?
4) Should I pursue a non-discharge Chapter 20 instead?
5) Has anyone seen an investor or hard money lender ever really work?
6) Any other suggestions?

Thanks!

[Mr. Knowitall]

1. If you hire a lawyer, you can have your lawyer entirely take over negotiations.

2. Shop around. Consider getting a referral from your bankruptcy lawyer.

3. You tell us. What do you think it would establish?

4. A "chapter 20" isn't possible in every jurisdiction or circumstance, and is much more complicated after the Bankruptcy Reform Act. Talk to your bankruptcy lawyer.

5. Er... what?

Why would your second mortgage lender want to give up its claim to the property. You foresee an upside in the future when the property has enough equity to cover both mortgages. They don't have to make a gift of the upside to you.