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Stripping a second mortgage in bankruptcy

7/23/2012

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Erasing a mortgage
Most clients have the misconception that filing bankruptcy will modify a mortgage to make it affordable.  Unfortunately, this is often not the case. What a Chapter 13 bankruptcy can do is allow you to “catch-up” missed payments by stretching out the period to pay that money back.
Example:  Your mortgage is $1400 per month; you are in foreclosure, and behind $20,000. A Chapter 13 can stop the foreclosure, allow you to resume your regular payment of $1400, plus an additional bankruptcy payment to “catch up” the delinquency. In a 5 year plan this would be approximately $333 per month. ($20,000 / 60 months = $333)

A bankruptcy rarely reduces the first mortgage payment on a primary residence. What a Chapter 13 bankruptcy may do is “strip” or eliminate a 2nd and/or 3rd mortgage/equity line on your house. That can sometimes erase a huge amount of debt, in effect reducing your house payment. What is the test to “strip” a 2nd mortgage? There must be no equity above the first mortgage.  

Example:  Your house has depreciated to $200,000. The payoff on your 1st mortgage is $202,000. You may be able to eliminate a 2nd mortgage/equity line regardless of the amount.
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  • Home
  • Firm Info
    • Contact Us >
      • Directions to Monroe office
    • Attorney Profiles >
      • Jason D. Witt
    • Fee Schedule
  • Family Law
    • Child Custody
    • Child Support
    • Divorce
    • Property Division
    • Alimony and Post-Separation Support
    • Separation Agreements
    • Domestic Violence Protective Order
  • Criminal Law
    • Traffic/DWI >
      • Traffic Tickets
      • Suspended or Revoked License
      • Driving While Impaired
    • Misdemeanors
    • Felonies
    • Expungements
  • Other Areas
    • Bankruptcy Law >
      • Personal Bankruptcy
      • Chapter 7 vs. 13
      • Bankruptcy Myths
      • NC Bankruptcy Exemptions
      • Bankruptcy Means Test
      • Bankruptcy Disclaimer
    • Debt Settlement
    • Foreclosure Defense
  • Blog