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Depreciated home values have left a large American population with homes that have no equity or are significantly underwater. The drop in the housing market coupled with a weak employment rate have left homeowners with home mortgages that they cannot afford to pay. Many homeowners are also strapped with second mortgages or lines of equity that were taken out during the housing boom. As a result, millions of families find themselves with second mortgages that they cannot afford to pay or to even settle with. For these homeowners, Chapter 13 bankruptcy can offer a powerful option to eliminate second mortgage liens on their home.
Using Bankruptcy to Eliminate Second Mortgages
Chapter 13 Bankruptcy offers homeowners the opportunity to eliminate second mortgages and equity lines of credit on their residence. Filing Chapter 13 bankruptcy gives individuals the opportunity to treat second mortgages as unsecured debt. Treating your second mortgage as unsecured debt, allows you the ability to pay only a percentage of your total second mortgage. Once the Chapter 13 discharge has been received, the mortgage company will be legally required to remove the second mortgage lien from your home.
How Does Chapter 13 Lien Stripping Work?
When a person\'s house is significantly underwater they may qualify to have their second mortgage treated as unsecured debt. The advantage to having a second mortgage treated as unsecured debt, comes from how much of the second mortgage will have to be paid back. Depending on the proposed payment plan a person may pay as little as 0% to unsecured creditors and to their second mortgage.
The ability to remove your second mortgage as part of a lien stripping is not available to all individuals whose homes are underwater. In order for a second mortgage to quality for this treatment, the value of the home must not be above the first mortgage on the property. In essence, the second mortgage must not have any equity to attach to. For example if your home is worth $150,000 and your first mortgage is $230,000 and your second loan is $75,000, then your second loan can qualify to be stripped in a bankruptcy. In this scenario your home is worth below the outstanding balance on your first and therefore your second is completed unsecured.
It is very important that an individual obtain a Chapter 13 bankruptcy discharge, in order to remove the second mortgage. If a Chapter 13 case is dismissed or converted to a Chapter 7 bankruptcy, then the lien from the second mortgage will remain on the residence.
The ability to remove an equity line of credit or HELOC as part of a bankruptcy can give homeowners a better fighting chance to keep their home and build equity sooner. Many homeowners have stopped paying on their second mortgage and have not taken any action to remove the lien from the property. Although the mortgage company may not take any action for a long time, this does not mean that the second lien will not be a problem in the future. As long as there is a recorded lien on your property from the second mortgage the issue will resurface again if it is not resolved.
Norma Duenas is the author of this article on filing for bankruptcy. Find more information, about orange county bankruptcy lawyers here
Using Bankruptcy to Eliminate Second Mortgages
Chapter 13 Bankruptcy offers homeowners the opportunity to eliminate second mortgages and equity lines of credit on their residence. Filing Chapter 13 bankruptcy gives individuals the opportunity to treat second mortgages as unsecured debt. Treating your second mortgage as unsecured debt, allows you the ability to pay only a percentage of your total second mortgage. Once the Chapter 13 discharge has been received, the mortgage company will be legally required to remove the second mortgage lien from your home.
How Does Chapter 13 Lien Stripping Work?
When a person\'s house is significantly underwater they may qualify to have their second mortgage treated as unsecured debt. The advantage to having a second mortgage treated as unsecured debt, comes from how much of the second mortgage will have to be paid back. Depending on the proposed payment plan a person may pay as little as 0% to unsecured creditors and to their second mortgage.
The ability to remove your second mortgage as part of a lien stripping is not available to all individuals whose homes are underwater. In order for a second mortgage to quality for this treatment, the value of the home must not be above the first mortgage on the property. In essence, the second mortgage must not have any equity to attach to. For example if your home is worth $150,000 and your first mortgage is $230,000 and your second loan is $75,000, then your second loan can qualify to be stripped in a bankruptcy. In this scenario your home is worth below the outstanding balance on your first and therefore your second is completed unsecured.
It is very important that an individual obtain a Chapter 13 bankruptcy discharge, in order to remove the second mortgage. If a Chapter 13 case is dismissed or converted to a Chapter 7 bankruptcy, then the lien from the second mortgage will remain on the residence.
The ability to remove an equity line of credit or HELOC as part of a bankruptcy can give homeowners a better fighting chance to keep their home and build equity sooner. Many homeowners have stopped paying on their second mortgage and have not taken any action to remove the lien from the property. Although the mortgage company may not take any action for a long time, this does not mean that the second lien will not be a problem in the future. As long as there is a recorded lien on your property from the second mortgage the issue will resurface again if it is not resolved.
Norma Duenas is the author of this article on filing for bankruptcy. Find more information, about orange county bankruptcy lawyers here