Los Angeles, CA -- (SBWIRE) -- 10/24/2016 -- Now homeowners can get rid of their second mortgage lien by filing a Chapter 13 bankruptcy. With the collapse of the real estate market in 2008, the effects are still lingering and many homeowners owe more on their mortgages than what the home is worth. This mortgage deficiency often leads to foreclosures and short sales, and the homeowners may end up being liable for paying the deficiency. Some homeowners can get rid of their second mortgage lien by filing a Chapter 13 bankruptcy. This is referred to as chapter 13 lien stripping.
When Can A Second Mortgage Be Stripped?
Stripping or removing a second mortgage lien requires the value of the home to have declined to a point where the second loan can no longer be secured by owner equity in the home. Before filing bankruptcy, getting a professional appraisal is required to help determine whether the value of the home is less than the first mortgage. If the appraisal proves that the value of the house is below the balance of the first mortgage, a 2nd lien strip may be possible.
If the second mortgage lien is partially secured by equity in the home, then stripping it isn't possible. In other words, the second mortgage cannot be stripped through bankruptcy if the value of the home is more than the balance owed on the first mortgage.
How to Strip A Second Mortgage Lien
A motion asking the court to strip a second mortgage lien is allowed after filing a Chapter 13 bankruptcy. Some courts require an adversary proceeding brought about by the debtor in order to strip a second mortgage lien; which means it takes more work on the part of the bankruptcy lawyer. If the lender objects to stripping the 2nd lien, the bankruptcy court usually sets a hearing where both the debtor and the creditor can present evidence about the fair market value and the lack of equity. Additional evidence or a second appraisal may be required if there's only a slight difference between the value of the home and the balance of the first mortgage.
Courts don't always agree when a second mortgage will be stripped from the home. Typically, courts require that lien will not be stripped until the bankruptcy is discharged; which occurs at the close of the case. A special motion is usually required for chapter 13 lien stripping. If the court rules in the owner favor, the unpaid amount will become an unsecured debt, which may be eliminated according to the Chapter 13 plan.
Bankruptcy Attorney, Lauren Rode instructed, "The simple rule of thumb is to determine if the value of your house is less than the first mortgage. If you are upside down on your first mortgage, you may be able to file Chapter 13 bankruptcy to remove the second mortgage lien from your home."
Get a Free Case Evaluation
Consumer Action Law Group has bankruptcy attorneys that can guide homeowner how to get rid of second mortgage. The first consultation is usually free by a Los Angeles Bankruptcy Attorney to determine if they qualify; the first consultation is free.
About Consumer Action Law Group
Consumer Action Law Group is a law firm dedicated to helping consumers in consumer-related matters or consumers that experienced fraud and scam. Bankruptcy lawyers in the team are knowledgeable and experienced in the areas of eliminating debt, mortgages fraud, auto fraud, and foreclosures. They have direct experience in consumer fraud matters and helping consumers who are facing financial crisis, foreclosure, issues with employers, and problems with auto dealers.
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