Financial hardships caused by Home Equity-Lines of Credit along with other second mortgages are not always resolved after a first mortgage loan modification. However, lenders may be precluded from pursuing the borrower personally when the debt was discharged in a bankruptcy proceeding, or when the second loan was “purchase-money” for a California property. California law now also precludes mortgage holders from pursuing a deficiency action against borrowers when the lender has approved and accepted the terms of a short sale transaction. Since situations vary, you should consult a qualified attorney for legal advice as to a specific matter.​

Under different circumstances, when the homeowner is able to keep their property after the first mortgage was modified, the overall monthly housing expense may still be overwhelming especially when taking into account the second mortgage payment and the reality that the combined loans may significantly exceed the property's current value. Furthermore, some people may continue to struggle financially because of their credit card debt which carries with it the threat of lawsuits, bank levies, and wage garnishment.​

Bankruptcy and debt settlement are two potential solutions to burdensome debt. Debt settlement refers to negotiating with unsecured creditors and settling on a payoff amount for much less than the total balance owed. Some individuals, particularly those who have substantially high balances owed and limited means to save money, may find bankruptcy a better alternative. It is recommended that anyone undergoing these challenges should speak with an experienced legal professional who can provide counsel tailored to an individual's unique circumstances.

In any case, an important point needs to be made clear — when a homeowner who keeps real property, receives a discharge of the debt from Chapter 7 bankruptcy, the second mortgage deed of trust will remain on title allowing the second mortgage lender the opportunity to exercise their deed of trust foreclosure rights. Of course, that will not be practical until there is equity in the property.

Darren J. DiMarco is a California attorney handling debt-related cases only. He also has over 20 years of experience in real estate financing. His combined experience in these two arenas will prove valuable to those undergoing financial hardships involving mortgage debt. DiMarco's law firm is not only successful in helping clients eliminate debt through bankruptcy, the firm's attorneys also help clients avoid bankruptcy and still get out of debt by settling credit accounts for much less than the balance due.

For help, contact the DiMarco Warshaw law firm. For a free phone consultation Call (888) 890-5474. Or, you can email us at: [email protected].