Eliminate a Second Mortgage
Learn About Lien Stripping and How it Can Help You
If your home's value has decreased since you purchased it, you may have taken out a second mortgage to help improve your financial status. However, if you are now struggling to pay off your first and second mortgage, filing for Chapter 13 bankruptcy may be able to help you eliminate your second mortgage. This is possible via a process called lien stripping. Lien stripping is used in Chapter 13 bankruptcy to allow people who are upside down on their house to eliminate their junior liens such as a second or third mortgage.
By using a lien strip, the bankruptcy court takes your second mortgage, which is a form of secured debt that can result in your home's foreclosure if you miss a payment, and transfigures it to an unsecured debt by instructing the lender to remove its lien from your property. You can only strip your second mortgage if the amount of your senior liens on your property exceeds the home's market value. This means if you have a first and second mortgage, your first mortgage balance must be more than what your home is worth prior to eradicating your second mortgage.
Is lien stripping for you?
Once you file for Chapter 13 bankruptcy, the second mortgage you strip is treated as an unsecured debt. Similar to credit card debt, you are not required to make payments on this form of debt outside of your bankruptcy plan. Instead, you will be expected to pay a specific amount of your second mortgage via your Chapter 13 repayment plan. When the plan is completed, anything that was not paid off is discharged. If you do not complete your repayment plan, the second mortgage cannot be stripped.
There are various benefits to lien stripping and filing for Chapter 13 bankruptcy including:
- A fresh financial start
- Avoid foreclosure on your home
- More manageable payments
- Discharge of any unsecured debts after your repayment plan ends
Repayment plans can last anywhere from three to five years and ensure your unsecured debt payments are feasible for you and your family.
How We Can Help You Establish a Fresh Financial Future
Our Charlotte bankruptcy attorney has more than 15 years of experience and has helped a plethora of clients resolve their bankruptcy issues. If you find yourself struggling to make mortgage payments and wish to learn more about lien stripping, please contact Schwilm Law Firm, PLLC today. Free, confidential consultations are available so you can learn how our firm can help you resolve your financial problems. We look forward to assisting you start a new, debt-free life.