Getting Rid of Second Mortgages
Stripping off Second Mortgages
Millions of American homeowners are now "upside-down" on their home mortgage loans and they are looking for a way out. For many homeowners, particularly those who have both first and second mortgages, they owe a lot more money on their home than it is currently worth.
Homeowners in Florida have seen home values drop 30-50% (and a lot more in some areas). Many are either unable to make the payments on both of their mortgages or are making a "business decision" to walk away without ever exploring ways to save their home.
Wouldn’t it be much easier to save your home if you only had a first mortgage and no other payments? What if you could effectively wipe out $10,000, $50,000 or $100,000 of what you owe?
If your home has significantly decreased in value, and you have a second mortgage or home equity loan, we may be able to remove that lien and strip off the second mortgage by filing a Chapter 13 reorganization. If your home is only worth what you owe on your first mortgage, the second mortgage is no longer considered to be a "secured" obligation and can often be removed in a Chapter 13 bankruptcy. The legal strategy we use is to essentially convert your second mortgage or home equity loan to an unsecured debt. You would then only be obligated to repay some of the debt over 3 to 5 years. The remainder of the debt would be discharged.
This process is called "Lien Stripping " and has many benefits:
- Lien stripping will lower payments going toward your monthly mortgage obligation;
- Any money paid toward the stripped lien would be paid at 0% interest and often is repaid for only pennies on the dollar;
- At the successful completion of the chapter 13, documents are filed with in the Official Records to legally remove the secondary mortgages or liens from your property. Any unpaid balances are eliminated or discharged.
Lien Stripping Example:
You owe $200,000.00 on your first mortgage.
You owe $50,000.00 on your second mortgage or home equity line of credit (HELOC).
Your home is worth only $199,000.00.
Lenders are only secured up to the value of the property. In this example, the first lender is secured by the property value. Because the property has declined in value and is worth less than the amount secured by the first mortgage, the second lender has nothing securing their lien. In a Chapter 13 bankruptcy, you may be able to "lien strip" the second lender.
The second mortgage holder would be treated as an unsecured creditor, and would not be able to collect on the second mortgage or HELOC after the bankruptcy discharge. You keep the first mortgage and keep the house.
Florida Bankruptcy Attorney
If you are thinking about filing for Chapter 7 or Chapter 13 Bankruptcy in the State of Florida, contact The Forrest Law Firm today! We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.
Florida bankruptcy attorney Christopher Forrest represents clients in Sarasota County, Manatee County, Pinellas County, Hillsborough County, Venice, North Port, Sarasota, Bradenton, Tampa and St. Petersburg, and surrounding areas.