My question involves bankruptcy in the state of: Michigan

Filed & received chapter 7 discharge in Sept 2007. Included everything: home 1st mortgage, home equity loan and home improvement loan (that should have had a lien against the property), among other debts. Did not sign reaffirmation agreements for anything. Have continued to live in the home, continuing to pay the 1st mortgage only. Have since rebuilt credit to a relatively good level. Recent credit report shows all three of those loans as marked "paid or paying as agreed" and of course, they each note the bankruptcy; also, none display a current balance, but the "past due" is noted as zero.

1st question: In the situation noted above, if I STOP paying the 1st mortgage and allow the home to foreclose (I understand that they can only act upon the property by taking repossession, of course), how will that affect my credit record? It is my understanding from some of the answers I've received (and this makes the most sense), is that since the loan is no longer my responsibility, a "foreclosure" on that loan wouldn't be "my" foreclosure - i.e. will not appear on my credit as a foreclosure AFTER the bankruptcy. Is that correct? I and friends in same boat have received a LOT of conflicting information in regard to this (from bankruptcy lawyers, real estate professionals, mortgage professionals and even on this forum).

2nd question: Because the above question has had a lot of conflicting answers, and because now it is potentially affecting my ability to obtain a preapproval (and/or an actual mortgage), I need this answered (I have to move from this area soon). This particular mortgage agent told me the following, after having spoken to his underwriter:

"I have reviewed the underwriting guidelines and have conferred with our head of underwriting regarding the status of your current home loan. I am concerned that you are still obligated on the current loan. I understand that you contend your mortgage was charged off in your bankruptcy and you have no obligation to repay it, however, my understanding of bankruptcy proceedings is that mortgages are typically not satisfied and although you are afforded protection from foreclosure under the umbrella of the bankruptcy, that you are still obligated for the debt. Here is my first question…have you received a “release of lien” regarding the mortgage on your home? (if so, please forward that to me) Since you have not been foreclosed on, I would think that you have not, but if your mortgage has been satisfied, you should have received one and that would probably answer the balance of my questions and concerns. If the property has not been foreclosed on or you have not received a release of lien in spite of the mortgage being “charged off” as part of your bankruptcy, it has not been satisfied and you are most likely still obligated on it. Therefore from an underwriting standpoint on a future mortgage, that means that I need to treat that mortgage debt just like I would for a borrower that did not go through a bankruptcy."


What are your thoughts on his comments regarding the "release of lien" and what does he mean "...mortgages are not typically satisfied"???? I understand what a lien is...and that the mortgager still has a lien against the property - which is why they can repossess it - however, I'm not responsible for the lien anymore, right? Isn't the bank (who now owns the house for all intents and purposes) the one that has to worry about it?

I'm so confused........

(Sorry for the long post...wanted to explain the whole story.)

Thanks in advance for any info you can provide.