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What are Zombie Mortgages?

Zombie mortgages or zombie foreclosure can have devastating consequences for individuals who believe they have had their mortgage written off after the conclusion of a Chapter 7 bankruptcy. If you had a second mortgage and you believed you were relieved of it through bankruptcy, this may not be the case. And after a long while, you may be surprised to see that you have an outstanding unpaid mortgage that if not taken care of, can result in the loss of your current home.

These unexpected zombie mortgages can be extremely distressing. Specifically, when a person has used bankruptcy as a way to get out from underneath crushing debt. This same person is likely working diligently to start again and build for their future. However, the financial implications of a zombie mortgage can be disastrous. If you reside near Danville, IN, and you are considering bankruptcy, working with a knowledgeable attorney can be extremely beneficial for the financial dilemma you are experiencing. Christopher L. Arrington is a Danville bankruptcy attorney who can help you explore options to remedy your troubling financial situation.

How Do Zombie Mortgages Happen?

There are two scenarios in which a zombie mortgage may creep up on a person unexpectedly.

The first example is if you took out a second mortgage and even though you were paying it, your payments were not being received and processed by the lender. This is because, at some point, the lender vanished and no longer exists. As a result, you continue to pay the first mortgage with ease forgetting about that second mortgage. But sometime down the road, a new company purchases that second mortgage, and then you get a letter telling you that you are expected to pay it off or you could lose your current residence.

The second example takes place when a person puts their second mortgage in their bankruptcy filing. So, while the first mortgage may have continued to be paid, the second was not. But that does not close the second mortgage, and in fact, it is still active. If another company buys the debt, it must be paid. Because of this, the person will be forced to pay or they will lose their home.

When a company that holds a second mortgage goes out of business, it may make it difficult for a property owner to pay off that loan. With inaction lasting over a period of time, the property owner may believe that their debt has gone by the wayside just like the company. However, this is not how the process works. Just like bankruptcy does not tend to discharge a mortgage. Any lender that goes out of business will sell their debt to companies that specialize in buying it. Once a new company owns the debt they have the right to demand payment for it.

Speak With an Indiana Bankruptcy Attorney Today

Bankruptcy can be highly complicated and confusing. If you had a second mortgage that seemingly disappeared, whether on its own or after filing bankruptcy do not allow the issue to linger. Finding the owner of your mortgage is essential. Call the Danville bankruptcy lawyer Christopher L. Arrington to discuss your case during a free consultation at (317) 745-4494.

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