Using The Law To Eliminate Second And Third Mortgages
If you take out a loan and use your home as collateral, the lender will put a lien on your property to secure the loan. If you default on the loan, the lender has the right to force the sale of your home to repay the debt.
When the real estate market is down, it is possible for homeowners to owe more on the property than it is worth on the market. For people facing financial difficulty, the reduced home value can actually work to their advantage.
Whenever you use your home as collateral on a loan, it is considered to be a subsequent mortgage on your home. By using a process called lien stripping, it may be possible to eliminate second and third mortgages as part of a Chapter 13 bankruptcy. At Levitt & Slafkes, P.C., our lawyers have helped homeowners with the process of eliminating second and third mortgages.
Understanding The Lien Stripping Process
Let’s say that the current balance on your original mortgage is $250,000. Five years ago, you took out a $25,000 home equity loan to remodel. Two years ago, you took out a loan for $10,000 to consolidate some debt. With the downturn in the real estate market, the value of your home has dropped to $240,000.
Because the value of your home is less than the amount you owe on the primary mortgage, there is no equity in the property to secure the $25,000 and $10,000 loans. In a Chapter 13 bankruptcy, these loans can be reclassified as unsecured debt, and the liens can be stripped from your home.
Contact Us Now With Your Questions About Reducing Your Mortgage Debt
Attorneys Bruce Levitt and Shelley Slafkes have used lien stripping to help homeowners in Essex County and throughout New Jersey. Contact our office to schedule a free initial consultation. You can reach us by filling out our online form or by calling 973-323-2953.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.