There are many reasons in which potential debtors may be considering filing for bankruptcy, but one of the most common questions people ask is of bankruptcy lawyers is whether they can get rid of their second mortgage by filing bankruptcy. The answer is that it depends on your situation. A second mortgage may only be discarded or “stripped” when a debtor files for a chapter 13 bankruptcy as it is not possible to strip a second mortgage in a chapter 7 bankruptcy. A chapter 13 bankruptcy requires the debtor to make monthly payments based on their available disposable income. If a debtor does not have an income, then a chapter 13 bankruptcy is not possible and the second mortgage cannot be stripped. Further your bankruptcy attorney should inform you that in addition to filing a chapter 13 bankruptcy, a debtor must have a home that is valued at less than what they owe on the first mortgage in order to qualify to strip your second mortgage.
Debtors should talk to a qualified real estate agent to get a proper broker priced opinion of the value of their home. If in fact the debtors home is worth less than their first mortgage, your bankruptcy attorney will be required to open an adversary proceeding in order to strip the mortgage. This requires filing a summons and complaint and obtaining a judgement from the court stating that in fact your home is worth less than your first mortgage and should the debtor successfully complete the chapter 13 plan in 3 to 5 years, then the debtor will not be liable for making any payments on the second mortgage.
Therefore, for some debtors they make elect to file a chapter 13 bankruptcy rather than a chapter 7 bankruptcy which requires no payments due to the fact that they will be able to get rid of a significant second mortgage on their home. If the debtor does qualify for a chapter 7 bankruptcy, another option may be to simply walk away from the home and let if foreclose as the second mortgage could be discharged by filing bankruptcy in that manner as well.
If you have additional questions about whether you will be able to strip your second mortgage in a bankruptcy contact Symmes Law Group today for a free consultation at 206-682-7975