Experienced Attorney Committed to Helping Clients Eliminate Second Mortgages
Homeowners may take out a second mortgage for a number of reasons, including to pay for unexpected expenses such as major home repairs or renovations. Taking out a second mortgage may seem like a good idea at the time, but you not be able to make these payments if you encounter financial hardship in the future.
If you’re struggling to make ends meet or falling behind on second mortgage payments, you may want to consider filing for bankruptcy. Filing for bankruptcy can help certain debtors eliminate their second mortgage and wipe their financial slate clean. Learn more about your options by scheduling a free consultation with the lawyers at Mitchell & Hammond today.
How to Eliminate Your Second Mortgage By Filing For Chapter 13 Bankruptcy in Oklahoma
Many debtors are able to eliminate their second mortgage by filing for Chapter 13 bankruptcy. The process of eliminating a second mortgage in a Chapter 13 bankruptcy is called lien stripping. To qualify for lien stripping, the amount of your first mortgage must exceed the current market value of your home. For example, say your first mortgage is worth $300,000 and your second mortgage is worth $50,000. If your home is worth less than $300,000, you might be eligible for lien stripping.
If your second mortgage is eligible for lien stripping, the court will convert it from a secured debt to a non-priority unsecured debt. This means it will be treated similarly to credit card debt, medical bills, and personal loans. You will pay some of this debt through your repayment plan, however you are not required to pay it in full. Instead, the remaining balance on the debt is discharged once you have completed the repayment plan in three to five years.
Basically, your second mortgage is not immediately eliminated when you file for Chapter 13 bankruptcy. But if you qualify for lien stripping, you will no longer have to make monthly payments on your second mortgage after filing for Chapter 13 bankruptcy. But you will be required to comply with the terms of your repayment plan. The balance on your second mortgage that is not paid through your payment plan will be eliminated once your bankruptcy case is closed.
Does Lien Stripping Apply to Third Mortgages in Chapter 13 Bankruptcy?
Lien stripping can eliminate more than just your second mortgage. In some cases, lien stripping in Chapter 13 bankruptcy can be used to eliminate both your second and third mortgage.
If you have three mortgages, both the second and third mortgages can be stripped as long as the first mortgage is worth more than the current market value of your home. For example, say your first mortgage is worth $300,000, your second mortgage is worth $50,000 and your third mortgage is worth $30,000. If your home is worth less than $300,000, you may be able to eliminate both the second and third mortgages in Chapter 13 bankruptcy.
Sometimes, you will only be able to eliminate the third mortgage rather than both the second and third mortgage. This happens If your home is currently worth more than your first mortgage, but less than the combined value of your first and second mortgage.
Can You Eliminate A Second Mortgage in Chapter 7 Bankruptcy?
In the past, certain states did allow lien stripping in Chapter 7 bankruptcy cases. But in 2015, the Supreme Court ruled that secured property debts such as second mortgages could not be stripped in Chapter 7 bankruptcy. As a result, lien stripping is not an option if you file for Chapter 7 bankruptcy.
Because lien stripping is not available in Chapter 7 bankruptcy, you may lose your home if you are behind on mortgage payments and choose to file for Chapter 7 bankruptcy. Talk to a bankruptcy attorney at Mitchell & Hammond to learn more about protecting your home in a Chapter 7 bankruptcy.
Schedule A Free Consultation With Mitchell & Hammond to Learn How to Eliminate Second Mortgages
If you are in need of financial relief, filing bankruptcy to eliminate your second mortgage and other debts might be the answer. However, you should discuss all of your options with the experienced bankruptcy attorneys at Mitchell & Hammond.
Tell us more about your current financial situation so we can determine whether or not bankruptcy is the right option for you. If it is, we will guide you through the process of filing for bankruptcy and discharging your debts, including your second mortgage. To schedule a free consultation, call Mitchell & Hammond at 405-216-0007 or submit your information via the form on this website.