How To Remove A Second Mortgage
A Chapter 13 bankruptcy can be a powerful tool to rebuild your financial health. It gives you the luxury of time to recover from a financial setback and rebuild your life. It can stop a foreclosure, and in the correct circumstance, allow you to remove a second mortgage.
Is Your First Mortgage Underwater?
In most cases, having a mortgage that is underwater is a bad thing. It means you owe more on your loan balance than your home is worth. For decades, this rarely happened. But after the banking crisis, it became more common. It is still a problem for some.
If this is your situation, bankruptcy may be able to help. I am attorney Steven F. Bilsky, and I have helped many people in Tennessee deal with these issues. I have more than 39 years of experience helping clients obtain debt relief by filing for bankruptcy.
Is Your Second Mortgage Unsecured?
Mortgages usually are secured by the value of your home. A second mortgage, home equity loan or a line of credit tied to your home, however, can become unsecured when the value of the home is less than that of the first mortgage.
In this case, if the first lender foreclosed and sold the home, they would come up short. Their selling price would not pay for the full value of the loan. And this means a lender holding a second mortgage would receive a whole lot of nothing.
A Chapter 13 Can ‘Strip’ The Second Mortgage
One benefit of a Chapter 13 is that you can use it to classify your second mortgage as “unsecured” and bankruptcy procedures allow you to strip the lien off of the title of your home. It then becomes like credit card debt or medical bills and depending on your Chapter 13 plan, you may only pay pennies on the dollar or nothing.
If you successfully complete the plan, you can then discharge this debt. While this scenario is a somewhat special circumstance, it can be very useful. I can examine your mortgage, your home’s valuation and any additional liens to determine if a certain type of debt relief is available for you.
Contact Me Today
As a bankruptcy lawyer, I have been helping people throughout the Memphis area for 39 years. To schedule a free initial consultation with me, contact my office at 901-525-6692 or use my online contact form to set up an appointment.