SAVE YOUR HOME BY ELIMINATING A SECOND MORTGAGE
Posted By Jeff Angres on Jan 5, 2010 3:18pm PST
Many of today’s homeowners have more than one mortgage on their home and are struggling to pay multiple mortgages. One good thing to come out of the declining real estate market is, if you have a 2nd mortgage on your home, pursuant to Sections 506 and 1327(b)(2) of the United States Bankruptcy Code, it may be possible to have the second mortgage eliminated or “stripped off” in a Chapter 13 Bankruptcy. If the fair market value of your home is less than the balance of your 1st mortgage, then your 2nd mortgage is considered to be completely “unsecured”. Therefore, in a Chapter 13 Bankruptcy, it is possible to “strip-off” the 2nd mortgage lien. Once the 2nd mortgage is "stripped-off," it is no longer a secured debt and becomes an unsecured debt just like a credit card or medical bill. Therefore, the 2nd mortgage company, through the Chapter 13 bankruptcy, is paid at the same rate as the rest of your unsecured debt, which is often at a fraction of the original balance.
The first step in determining whether your 2nd mortgage can be stripped off is to get an appraisal of the property. The appraisal will tell you the current value of your home. Next, you will need to get a payoff letter from your 1st mortgage company, just as you would if you were selling your home. If the appraised value of your home is less than the payoff amount of your 1st mortgage, then it may be possible to have your 2nd mortgage stripped-off in a Chapter 13 Bankruptcy. However, if the appraised value of the home is even one penny greater than the payoff amount of the 1st mortgage, then the 2nd mortgage is considered to be partially secured and, therefore, not eligible to be stripped-off. Eliminating 2nd mortgages is just one of the many ways a Chapter 13 Bankruptcy can help people get back on their feet and get a fresh start.
Jeffrey Angres is a Chicago Bankruptcy Attorney who concentrates his practice in representing people in Chapter 7 and Chapter 13 Bankruptcies.
Contact the experienced attorneys at Glanzer & Angres, P.C. at 1-877-337-2227 to discuss your specific situation, and to schedule your free, in-person consultation.