Well, technically, you did discharge your personal liability for that second mortgage, but it was and it is still attached to your home.
When you file a chapter 7 bankruptcy, it discharges almost all of your debt, including your mortgages. However, this just discharges the debt from you personally. If the debts are secured by a house, you still have to keep paying those debts if you want to keep the collateral.
You can chose to reaffirm the debts and re-assume personal liability for them. That way, they report positively on your credit. Or, you can keep that personal discharge but still keep making payments on the loans. So long as you keep paying the mortgages, you will keep the home. Eventually, you’ll even pay if off and own the title, free and clear.
However, just because you received a personal discharge doesn’t mean that the mortgage was discharged from your home.
In a chapter 7, you can strip (remove) non-consensual liens, like judgments, from your title. You cannot strip consensual mortgages. This means that you cannot strip or remove a mortgage that you signed and agreed to.
Now in a chapter 13, you can sometimes remove a 2nd mortgage if there was no equity in your home to secure that second mortgage. However, that involves some fairly complicated court filings, and you would know if that had happened.
If you receive a friendly phone call from your 2nd mortgage lender advising that you are in arrears for missed mortgage payments, you need to either work out a repayment plan with them directly, or maybe even file a chapter 13 to catch up on those missed 2nd mortgage payments. Otherwise, they can and will foreclose on your home.
That being said, they can take the home, but they cannot sue you personally, because your personal liability for the 2nd mortgage was discharged by your chapter 7.
No they will not (as of July 1, 2019). That being said, most medical creditors and hospitals, including IHC, will still sue you for deceased spouse’s medical bills here in Utah.
A long-term client/friend called me out of the blue yesterday. We had been planning to file a chapter 13 because her husband had passed away and the medical creditors were circling. They had filed suits, obtained judgments, and were closing in.
She doesn’t watch the news (too depressing), but she turned on the tv to load one of her saved programs, and there was a KUTV report on a “Get Gephardt” investigation into the University of Utah’s post-death collection practices. ( I am linking the article below and cutting/pasting it).
After the report, she called the attorney for the U, explained her situation, and within 10 days, he had withdrawn all of those hospital liens/judgments against her home. Now she doesn’t need bankruptcy!
She was so happy that she called me to tell me the good news. It seemed like a very good thing to share.
Here is the article by Matt Gephardt and Cindy St. Clair:
LAYTON, Utah (KUTV) — This past February, Jodie Elliott’s husband, Larry, passed away unexpectedly. As she began settling his affairs, a bill arrived from University of Utah Healthcare saying Larry owes $390.85 for a trip to a dermatologist.
Elliott says she called University of Utah Healthcare and informed them that her husband was deceased.
“They said, ‘Oh, well these medical bills will now become yours and we’re going to change the bills and put them in your name,’” she said. “I said, ‘I don’t understand why I’m paying these because they’re not mine. I never signed for them.'”
Sure enough, a couple weeks later the same bill arrived demanding Elliott is responsible for the debt. Elliott protested, but it didn’t do any good.
“[University of Utah Healthcare] said, ‘Well, it’s a Utah state law; whenever a husband or a spouse dies, the remaining spouse is responsible for all the medical bills.’”
When Get Gephardt reached out to University of Utah Healthcare on Elliott’s behalf, a spokesperson pointed to state law, which says that if something is a family expense, then it’s the responsibility of both husband and wife.
When Get Gephardt asked how a man going to a dermatologist is a family expense, University of Utah Healthcare referred further comment to its lobbyist, Dave Cassel, the executive vice president of the Utah Hospital Association.
“If it saves him from getting cancer down the road, I would argue it [is a family benefit],” Cassel said.
Cassel says University of Utah Healthcare is operating within the law.
“I think, like any business, they have the right to follow this law,” he said.
University of Utah Healthcare may have the right, but their competitors don’t exercise that right.
Get Gephardt called the other major hospital groups in Utah, MountainStar and Intermountain Healthcare. Both companies stated that they absolutely do not slap a surviving spouse with his or her late loved one’s bill. They’ll go after the estate and, if it’s tapped, they write off the bill.
When Get Gephardt told University of Utah Healthcare it seems to be the only organization using the heavy-handed billing policy, it had a change of heart.
“We are changing that policy,” said Kathy Delis, the administrative director of revenue cycle support service for University Hospital. “We are changing our policy to no longer bill patients’ surviving spouses for debt that’s owing. Instead, we will bill the estate or the probate.”
Larry’s bills are no longer Jodie’s problem.
Delis says the change is a direct result of Get Gephardt’s inquiries on Elliott’s behalf.
As for other surviving spouses who have been slapped with their late loved ones’ bills, University of Utah Healthcare says it is auditing its system to find out who is impacted, and plans to write off those debts, too