Would You Like to Get Rid of a Second Mortgage?

If you are overwhelmed by debt which includes a first and second mortgage on your home then you should consult with a knowledgeable bankruptcy attorney as soon as possible to discuss your options. There are many options for those who are working to own their home and which is best for you depends on your specific circumstances. One way of getting things under control and discharging a large amount of debt is by a process known as "lien stripping" or "cramdown". This is typically done as part of a Chapter 13 bankruptcy where the debtor's obligations are reorganized and reduced so a payment plan that the debtor can actually live with is agreed upon.

The way lien stripping and cramdown works is by basically classifying a second mortgage as an unsecured debt. This can only be done if your home is worth less than what you owe on the first mortgage. As an example, a family initially gets a home loan for $300,000 and then gets a second mortgage of $50,000. If the home's market value has decreased from the original $300,000 to $200,000 and only $25,000 of the first mortgage has been paid then $275,000 is still owed on the first mortgage. Foreclosure of the home at this point would not even cover the first mortgage, much less the second. A first mortgage cannot be discharged through Chapter 13 bankruptcy protection but when circumstances fit the above example then the judge on the case can discharge the second mortgage. Since there is no property that could discharge the second mortgage then it can be considered an unsecured debt. Any lien on the property based on the second mortgage can in this way be effectively "stripped". Since filing for Chapter 13 means that debt balances are negotiated down with creditors and reorganized so they are paid off over a three to five year period, creditors including second mortgage holders may be more willing to accept this situation than getting nothing at all.

Talk to a Bankruptcy Lawyer about Your Home Loan Options

There are many options for those who are underwater on their home loans, overwhelmed with debt and facing the possibility of foreclosure. Contact us at the San Diego Bankruptcy Pros to speak with a skilled and dedicated bankruptcy lawyer. We offer a free initial consultation on your case and we may be able to help you get out from under the mountain of debt that is holding you and your family back from a brighter financial future.