If you are facing financial struggles and you have more than one mortgage on your home, you should consider filing a Chapter 13 bankruptcy case. There are many benefits offered by a Chapter 13 filing. It is a flexible and comprehensive tool for handling all of your creditors at one time, while allowing you to eliminate the majority of your debt. An additional advantage for individuals with more than one mortgage is a procedure referred to as “lien stripping.”
Many– Americans, who obtained home equity loans when their property was worth more than it is today, are now “underwater” on their home. In other words, the value of their house is less than what they owe on their first mortgage, leaving no equity to support the second or third mortgages. In a Chapter 13 case, a debtor who is in this situation can argue that the inferior liens on the home should be treated as unsecured debt under the Chapter 13 plan. This can save you thousands of dollars because most unsecured creditors are only paid a small percentage (if anything) of the amount due in a Chapter 13.
For example, if your first mortgage is $150,000 and your second mortgage is $50,000, but your home is valued at $140,000, there is no equity to support the secured status of the inferior mortgage. This means that if the second mortgage is “stripped” and treated as an unsecured debt, you could eliminate up to $50,000 worth of debt!
If you are interested in learning more about lien stripping and how it could work in your situation, contact the legal team at Levitt & Slafkes to schedule a no-cost appointment. We will review your finances and help you understand all of your debt relief options.
We are bankruptcy lawyers who know how to make a difference in your financial situation. We have experience you can rely on and we care about your results. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation.