Bankruptcy effects in Note

[Andrej Petrovski]

I've seen a few notes now that are for sale and indicate the borrower is either filing chapter 13 or 7. I'm assuming that a chapter 13 is similar to the lender just modifying the loan ? Meaning making it more financially friendly to the borrower . Next question is regarding ch 7. Does the borrower pretty much walk away from the property and lead to foreclosure ? I'm still learning about notes in general and the concept of bankruptcy just came up. Thanks for any information !!!

[Patrick Desjardins]

Depends if talking about a first or second mortgage. Bankruptcy is a lot more damaging with 2nds than with firsts.

Chapter 7: borrower is no longer liable for the debt but debt stays on the home, which you can foreclose on.

Chapter 13: borrower gets into a payment plan and sheds unsecured debt. Issue is courts (wrongly) treat underwater loans as unsecured so they can be stripped.

As one attorney put it best.. BK attorneys and their low life clients now treat lien stripping as a right instead of a privilege.