Posted On : October 20, 2011 By : RobG
Struggling to pay your second mortgage? Do you have a second or third mortgage on your primary residence that is wholly unsecured? For instance, if the equity in your home is less than the outstanding balance of your first mortgage, there is no equity to secure the second mortgage, which means that the second mortgage is in fact wholly unsecured.
Wholly unsecured mortgage liens can be wiped out in a Chapter 13 bankruptcy case. This could mean more money for you to live on each month and reduce the risk of you defaulting on your first mortgage payment.
Partially unsecured mortgage liens secured by one’s primary residence cannot be reduced to the value of the collateral left to secure such lien. However, if the lien is against assets other than your primary residence and is not a purchase-money lien (meaning the lien is to secure a debt unrelated to the purchase of the property against which the lien is attached) the lien can be stripped down to the amount of the available equity in the property that actually secures that lien.
In addition, high interest rates can be crammed down to a much more reasonable rate in a Chapter 13 case, currently around 3%, – instead of the outrageous rates being charged by some creditors, saving you considerable money over time.
Strip-offs and cram-downs are not available in Chapter 7. However, certain judgment and other liens that impair available exemptions to a Chapter 7 debtor can be avoided and stripped off.
Ascertaining the value of your home is key. As you can imagine, opinions as to value can differ widely and be strongly influenced by self-interest. Proving a subjective fact such as value can be challenging and litigation to contest value is not uncommon. Knowledge of the law and good preparation is critical to correctly evaluate the strength of one’s case and reduce legal and court costs.
Since the availability of this kind of relief can depend on specific facts, and can prove to be highly beneficial, it makes sense to obtain a “Rights & Options” consultation with an experienced bankruptcy attorney.
Contact us now if you’re considering using Bankruptcy to help alleviate your mortgage obligations.