If you have more than one mortgage on your home and you are struggling financially, it may be time to consider filing a personal bankruptcy case. Filing an individual Chapter 7, 11 or 13 bankruptcy allows you a means for comprehensively dealing with all of your creditors and potentially eliminating some, all, or the majority of your debt. An additional benefit is a process referred to as “lien stripping.”
If you have a second or third mortgage on your home and the property does not have sufficient equity to support the inferior mortgage loan(s), a debtor can argue that the inferior liens should be treated as unsecured debt. If the inferior mortgage(s) are treated as unsecured debt in your Chapter 11 or 13 repayment plan, it means that you will likely only be required to pay a percentage of the amount due and owing. As you might guess, this could save you thousands of dollars!
By way of example, if your first mortgage is $300,000, your second mortgage is $50,000 and your third mortgage is $20,000, but your home is only valued at $290,000, there is insufficient equity to support the secured status of your second and third mortgages. By treating them as unsecured creditors, you could potentially eliminate $70,000 worth of debt.
Please keep in mind that every bankruptcy matter is different. If you are considering filing for bankruptcy protection, and you would like to schedule a no-cost consultation to discuss your options, please contact our office by completing the form on this website or calling us at (954) 280-5066.