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Bankruptcy Law/2nd mortgage
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Question
I am upside down on my home by thousands. I am current on my first but not my second, what happens to my second if I file a chapter 7. I have been researching it and found that the second may be stripped.
As the debtor in a Chapter 7 case, you have no ability to strip your 2nd mortgage, however, it might be possible in a Chapter 13 case. Chapter 13 sometimes allows the removal of a completely unsecured mortgage. To make that happen you have to prove that the senior liens add up to MORE than the current market value of the home.
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Let me show you an example, so you can see how this works. Let's say the house is worth 550,000. The 1st is owed $600,000 and the 2nd is owed $100,000. If all that is correct, there is no equity available for the 2nd. You have to go into court and prove there is zero equity securing any part of what you owe the 2nd, and then you should be able to strip the 2nd, treating it as an ordinary "unsecured" debt in your Chapter 13 plan.
In Chapter 7, the mortgages remain attached to the property. So if a person does a Chapter 7 but wants to be certain of keeping the property, they ought to pay all mortgages. On the other hand, if the person wants to walk from the property, they will probably be personally protected, but of course any mortgage lender can foreclose and take the property. Again, if you want to seek a lien strip, you have to do it in a Chapter 13. There are many factors involved in doing this. It may sound simple, but in reality it isn't.
Your next step is to see a local BK specialist.
If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/
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Answers by Expert:
Los Angeles Bankruptcy Lawyer Leon D. Bayer
Expertise
Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/
Experience
Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.
Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.
Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.
Education/Credentials
B.A., J.D.
Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000
MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.
Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.
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