Eliminating a 2nd mortgage loan when you file for Chapter 13 bankruptcy may sound like a fantasy, but for people in the right circumstances, a 2nd mortgage may very well be completely eliminated.
By filing for Chapter 13, a homeowner who has fallen behind on their first mortgage may be able to discharge the obligations of their 2nd mortgage. Keep in mind, however, that this does not apply in Chapter 7 bankruptcy.
Read below for more details on how this process might work.
When people file for Chapter 13 bankruptcy, they work together with the bankruptcy court to create a debt repayment plan that is paid over the course of 3 to 5 years.
This payment plan often includes overdue mortgage payments and frequently allows homeowners to catch up on their home loans while being protected from home foreclosure.
While the debtor is usually expected to make payments on their first mortgage, the 2nd mortgage loan is sometimes treated differently. Here’s how:
Thus, if a filer can convince the court to treat a 2nd mortgage as an unsecured debt, the burden of a second home mortgage may become much less troublesome.
First mortgages are not treated as lightly as second mortgages on a home, but Chapter 13 may still be able to reduce the burden of a first mortgage by:
With the recent tidal wave of home foreclosures, much Congressional attention has been focused on easing mortgage obligations for struggling homeowners. As a result, foreclosure laws are changing at a rapid rate.
A lawyer in your area may help you sort out the relevant laws in your state, and how they apply to your second mortgage. For a free consultation with a local bankruptcy lawyer, fill out the brief form below.
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