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What happens if I file a Chapter 7 bankruptcy in Michigan and I discharge the debt underlying my mortgatge?

Just because the debt was written off does not mean they will release the mortgage.  Michigan law (MCLA 600.3175(1)) provides:

(1) When a recorded mortgage on real property, land contract, or tax lien (except tax liens held by the state or any political subdivision of the state) on lands or property has been paid or satisfied or when 15 years have elapsed since the debt or lien secured by the mortgage, land contract, or tax lien became due and payable or since the last payment made upon it, and no civil action or proceedings have been commenced to collect the same and in case of tax deeds when no service of notice to interested persons (of any kind) has been filed with the county clerk, the owner of the land or property may institute an action in the circuit courts to discharge the mortgage, land contract or tax lien.

So – 15 years after your obligation to pay gets discharged – you have the legal right to file a law suit and have the lien discharged.

Just remember that you have to keep paying your real estate taxes or you forfeit your house to the county.

So – do you want to wait 15 years or do you want to try to cut a deal with the mortgage company. Perhaps you make a nominal offer to get the lien released. The worst that can happen is the lender says “No.”.  Or maybe they give you a dollar figure you can’t quite make at present, but at least gives you something to think about.

You may also want to keep some delinquent taxes unpaid – it is an additional deterrent to the mortgage company foreclosing, as the taxes will become their expense if they foreclose.  Taxing authorities will work with you to help the homeowner keep their home, and there are even funds available to get them out of a jam for at least a year if you talk to the county folks.

We live in a time like no other. Use the law as both a sword and a shield. Be smart.