Stripping a Second Mortgage in Chapter 7 Bankruptcy
Prevent Foreclosure by “Stripping” Second Mortgages in a 13 Bankruptcy
NOTE: When this was written it was only possible to strip a second mortgage with a Chapter 13 bankruptcy. Now you may be able to do so in a Chapter 7 bankruptcy action. We only currently practice in Chapter 7 Bankruptcy.
It is possible only in a Chapter 13 bankruptcy to “strip” a second mortgage lien from your home. This will help to make the property more affordable by reducing the monthly payment and therefore prevent foreclosure. This is especially useful now when many people’s property’s market value has decreased substantially since the mortgages were obtained. To qualify, the market value of the home must be equal to or less than the first mortgage. An appraisal of the property is necessary to make this determination, and the appraisal will be filed with the motion to “strip the second mortgage” at the appropriate time.
Your first step is to contact a Tampa bankruptcy & mortgage attorney who can help you explore your options and determine if you are eligible or want to file for a Chapter 13 bankruptcy. Our legal team is committed to providing people in Tampa and all of Hillsborough County with solutions to their legal issues.
For answers to your questions about what is involved in stripping second mortgages in a Chapter 13 bankruptcy, contact the law office of All Family Law Group, P.A. today for a free initial consultation with a lawyer to discuss your options.
Example of a Lien Stripping
An example of a situation where you can strip the second mortgage is as follows: A home or investment property has a first and second mortgage on it. If the appraised value of the property is $200,000.00 and the first mortgagee has a claim of $220,000.00 and the second mortgagee has a claim of $50,000.00, then the second mortgagee is totally unsecured and its lien can be stripped.
This means that in the Chapter 13 Plan, the second mortgage will not be included in secured creditors to be paid their full monthly amount, but will be included with the unsecured creditors, and only a portion of it will need to be paid over the life of the Plan. If any amount of the second mortgage is unsecured, it will not be able to be stripped. When all payments have been made on the Planplan, then the case will be discharged, including any unsecured debt which has not been paid, and including the unsecured second mortgage. Upon entry of the debtor’s discharge, the mortgage lien will be deemed void and will be extinguished automatically without further court order.
Steps if You Are Eligible for Lien Stripping
- Obtain an appraisal of the property.
- File a Motion to Determine Secured Status of Mortgage and to Strip Lien Effective Upon Discharge.
- Lender must object within 30 days or order granting motion will be entered by the judge.
So if you have a second mortgage and are facing foreclosure, there are options available which may help you to keep your home. A Chapter 13 bankruptcy will allow you to pay your first mortgage arrearage over the life of the Plan as well as to strip the lien on your second mortgage if you qualify. It can help you save your home!
If you have questions regarding stripping a second mortgage in a Chapter 7 bankruptcy, contact the law firm of All Family Law Group, P.A. We offer a free consultation to discuss your options.