Eliminating 2nd Mortgages

Eliminating 2nd Mortgages Through Bankruptcy

How a Chicago Bankruptcy Lawyer Can Help

With our current economy, many homeowners have lost a great deal of equity in their homes. Chicago is one of the cities which have suffered a major drop in property values across the United States. Many homeowners now find themselves “underwater” on their mortgages, owing more to their lender than their homes are worth. In the past few years many people across the nation purchased their homes with two mortgages: an 80% first mortgage and a 20% 2nd mortgage (80/20). Some of these loans were also Adjustable Rate Mortgage (ARM) loans, which adjusted the interest rate higher following a set period of time.

If you obtained this type of a loan or refinanced your home and took a 2nd mortgage, you may now find yourself in a situation where you are having trouble making your payments. Retaining the services of a qualified Chicago bankruptcy attorney from Law Offices of David Freydin can help you with determining whether the option of eliminating your 2nd mortgage is right for you.

If You Owe More Than Your Home is Worth

If the value of your home has fallen below the total outstanding balance of your first mortgage, it may be possible to eliminate or "strip off" your 2nd mortgage. For example, if you purchased a home for $400,000 with an 80/20 loan, you would have a first mortgage of $320,000 and a second mortgage of $80,000. If the value of your home now stands at $300,000 due to the economy and the plummeting home values, you may be able to rid yourself of the $80,000 second mortgage through a Chapter 13 bankruptcy filing.

The amount that you owe the 2 nd mortgage company will be paid at the same rate as the rest of your unsecured debt, which is often at a fraction of the original balance! Eliminating second 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. Not all homeowners will be able to do this. If you meet with one of our highly trained legal staff, we can review your financial picture and help you to determine exactly what steps can be taken to assist you in this matter.

Where the value of the home has fallen below the total outstanding balance of the first mortgage, it is possible to “strip off” the second mortgage in Chapter 13 bankruptcy. (The debtor must qualify for a Chapter 13 repayment plan). A second mortgage can sometimes be converted into unsecured debt and could be discharged or classified as non-priority debt in the Chapter 13 plan. We recommend that you contact us today for your free initial consultation.

For advice on eliminating your 2nd mortgage, contact a Chicago bankruptcy lawyer at Law Offices of David Freydin today! 

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