Expert: Norma Duenas - California Bankruptcy Attorney - 3/30/2010

Question
I owe $63,000. on my original first mortgage and I have an equity line with a balance of $134,000.  My house was just appraised last week with a Real Estate appraiser.  The value of my home is $166,000.00.  I am about $10,000 in arrears. Would I be able to file Chapter 7 and reaffirm my first mortgage and keep my home?

Answer
Generally if you are behind in your mortgage payments you would want to file for Chapter 13 bankruptcy. Chapter 13 bankruptcy allows you to pay back the arrears on your mortgage through a repayment plan.

If you file for Chapter 7 bankruptcy when you are not current on your mortgage payments, then there is a potential that the mortgage company will file a motion to lift stay, which if granted, allows them to proceed with a foreclosure on your home. Further in a Chapter 7 Bankruptcy you cannot eliminate a second mortgage, therefore you would also have to continue to make your payments on your equity line.

Generally you can only eliminate a second mortgage or secured equity line on your home through a Chapter 13 Bankruptcy. Based on the information you provided it does not appear that you would qualify to remove a second mortgage in a Chapter 13 Bankruptcy. In order to remove the equity line from your home, the value of your property would have to be at or below $63,000. This would result in the equity line being completely unsecured. For further information on who can eliminate a second mortgage, you can find more information here: http://www.socaladvocates.com/remove-second-mortgage

If you need further assistance you can contact me at norma@socaladvocates.com