Author Box
Articles Categories
All Categories
Articles Resources

Underwater Second Mortgages, Third Mortgages or Equity Lines of Credit and Bankruptcy

February 18, 2012 | Comments: 0 | Views: 161

Are you struggling with paying your first mortgage, second mortgage or even third mortgage each month? Is your house worth thousands less than what you owe? You are not alone. Millions of Americans have watched the value of their homes decrease month after month the last four or five years.

Many home buyers purchased their homes with an 80% first mortgage and 20% second mortgage. This allowed the homebuyer to avoid private mortgage insurance and put 20% down on the home. To make matters worse either one or both loans could have been interest only loans. Interest only loans allow the home buyer to only pay the interest for a period of time.

So you have a home that is worth less than what you owe and you are only making the minimum interest only payment each month on the first and second mortgage. Any little financial problem will send you into a financial tailspin. The good news is that bankruptcy can help.

In Chapter 13 and Chapter 11 unsecured liens or loans can be stripped off the property in the plan of reorganization. How can you get rid of a mortgage in bankruptcy? Well, if the value of your house is less than what is owed on the first mortgage, then the second mortgage is completely unsecured or underwater. If the house was sold or foreclosed on the second mortgage company would get nothing, and that is how they are treated when reorganizing your debts in a Chapter 13 or Chapter 11 bankruptcy case.

The key is the value of the house. The first thing that needs to be completed is a valuation of the house by the bankruptcy court. A motion is filed with the bankruptcy court asking the bankruptcy court to value your home based upon comparable sales in your neighborhood. If the second mortgage company accepts the value you believe to be true there will be very little more to do. If the second mortgage company objects to the valuation an evidentiary hearing or mini-trial as to the value of the house will be scheduled. Of course the second mortgage company is trying to prove that your house is worth more than is owed on the first mortgage. If they are successful then the second mortgage is not completely underwater and not removable. If it is held that your house is in fact worth less than the first mortgage you will be able to strip off the underwater second mortgage or equity line of credit. You will only have to pay the first mortgage and the lien securing the second mortgage will be reconveyed once the Chapter 13 plan or reorganization is completed.

West Coast Bankruptcy Attorneys is a Bay Area and California consumer bankruptcy firm filing Chapter 7 and Chapter 13 for individuals in need. Visit West Coast Bankruptcy Attorneys online to find out more about our bankruptcy lawyers or bankruptcy lawyers in Oakland committed to providing the best experience for a reasonable fee.

Source: EzineArticles
Was this Helpful ?

 
0
 
0
 
Rate this Article
 vote(s)
Feedback
Print
Re-Publish

Article Tags:

Bankruptcy

,

Lawyers

,

Attorneys

The 3 Month Payday Loans is most suitable options for the people who do not possess assets. There are a variety of loan options for the people who are willing to pledge assets against the cash

By: Cameron white l Finance > Personal Finance l July 09, 2013 lViews: 560

For many people, bankruptcy can make their world fall apart. The apparent loss of reputation coupled with the inability to take financial decisions can deter anyone from thinking clearly. But all is

By: noragwilt l Finance > Bankruptcy Lawyers l November 18, 2012 lViews: 304

If you are availing payday loans with monthly payments, it is easy for you to obtain quick money from online lending companies.By getting the best deals of loan, you can save money in terms of

By: Malen Cheks l Finance > Loans l November 16, 2012 lViews: 289

Loans online have become the popular source of income and people can make smart decision of taking it.Now, don’t go anywhere and sit in your home silently. Such deals would bring you money without

By: Marsh Jone l Finance > Loans l November 13, 2012 lViews: 288

Loans for the unemployed would let you feel comfortable with your unstable conditions due to jobless period.If you compare the rates of a few lenders, you would definitely get the suitable lender to

By: kelse roy l Finance > Loans l November 13, 2012 lViews: 467

By taking cash advance for bad credit, it is easy for you to improve your credit status. This loan is useful to relieve financial stress. This loan is totally free from credit verification and

By: Honard Nork l Finance > Loans l November 09, 2012 lViews: 301

There are many differences between filing for bankruptcy protection under Chapter 13 than under Chapter 11. A Chapter 13 reorganization is a much more streamlined process. Creditors do not vote on

By: Ryan C Woodl Finance > Bankruptcy Tips Advicel April 26, 2012 lViews: 203

One of the main reasons for the high divorce rate is financial difficulties. While most couples have disagreements about money, for many the problems and the blame for them can get out of hand,

By: Kristie Brownl Finance > Bankruptcy Tips Advicel April 26, 2012 lViews: 200

The question of whether a creditor is a considered an "insider" in a bankruptcy case is an important distinction. When you repay one creditor and not others, it is considered a "preference" because

By: Kitty Linl Finance > Bankruptcy Tips Advicel April 24, 2012 lViews: 157

Ever since the release of the phenomenon called the Internet, it seems that before people go to see a professional, they will take the time to look it up online. Don't get me wrong, the Internet can

By: Bob P Jonesl Finance > Bankruptcy Tips Advicel April 12, 2012 lViews: 171

Over the years, the bankruptcy code has taken on a new complexity that makes it almost imperative that an individual has the help of a bankruptcy attorney to file. It is true, that it is one's legal

By: Bob P Jonesl Finance > Bankruptcy Tips Advicel April 12, 2012 lViews: 143

There always seems to be anincrease in crime when the economy is not doing well. Whether it is increase of violent crimes like muggings and burglaries or white-collar crimes like embezzlement and

By: Kitty Linl Finance > Bankruptcy Tips Advicel April 10, 2012 lViews: 178

There are many differences between filing for bankruptcy protection under Chapter 13 than under Chapter 11. A Chapter 13 reorganization is a much more streamlined process. Creditors do not vote on

By: Ryan C Woodl Finance > Bankruptcy Tips Advicel April 26, 2012 lViews: 203

Unfortunately being injured in a car accident or at work can lead to filing bankruptcy. Even if you have a good claim for compensation it could take years before you are paid or a lawsuit settled. In

By: Ryan C Woodl Finance > Bankruptcy Tips Advicel March 30, 2012 lViews: 162