Second Mortgage Debt Relief

Second Mortgage “Stripping”

One of the advantages of filing bankruptcy under Chapter 13 is that an entirely unsecured second mortgage, or other junior mortgage, can be “stripped” from your homestead or other real estate.  This mortgage is then treated by the Chapter 13 plan as an unsecured claim, the same as a credit card or other unsecured debt.  Consequently, it only has to paid in part rather than being paid in full as for most mortgages.

“Stripping” unsecured second mortgages cannot be done in Chapter 7 cases.  Also, it can only be done when your home’s market value is less than the entire balance owed on the first mortgage, rendering the second mortgage entirely unsecured by any value of the home.  This means that in deciding whether to seek to strip off a second mortgage, an appraisal of your home will be necessary.

Second mortgage lien stripping is allowed by bankruptcy code sections 506 and 1322(b).  It requires committing to a three to five year Chapter 13 repayment plan, where the now-unsecured second mortgage is paid based upon your ability to repay it, the same as most of your other debts.

If you are trying to restructure your debt to make sure you can afford to keep the necessities of life, it makes sense for you to obtain a free consulation at our offices to discuss your options.

Steven Taylor [email protected]

Law Office of Steven Taylor, PC

Serving Central and Northern Indiana

1-800-966-8447

Filed under: Chapter 13 Bankruptcy Tagged: Chapter 13 Bankruptcy