Removing Unsecured Second Mortgages Through Bankruptcy
Misinformation: All home mortgages are secured loans.
The truth: Liens can be stripped from mortgages (and they can become unsecured) if the underlying property has an appraised value that is less than the mortgage.
In today's real estate market, many homes are worth less than the mortgages that have been taken out against them. If you have taken out second, third or fourth mortgages against your home, you may be able to strip those liens from your deed by filing Chapter 13 bankruptcy. This is a complex process that we will explain in our office. We usually require a real estate appraisal and payoff figures for the first mortgage to determine if this is a viable option for you.
At The Day Law Office in Spring Hill, Florida, our lawyers offer a free initial consultation to discuss lien stripping and how it works when you file Chapter 13 bankruptcy.
What is Lien Stripping?
When a lender has a lien on your property, they have a right to take the property if you stop making payments. Lien stripping involves the reclassification of a second or third secured lein to unsecured. Once we are able to reclassify the lein as unsecured, it is placed with the other unsecured debt and paid according to the chapter 13 Plan. Once the lien has been stripped from a mortgage, the loan is no longer secured. It becomes an unsecured debt like a credit card bill, and the lender no longer has a right to take your property as long as you remain in the Chapter 13 plan and complete the Chapter 13 plan.
Here's an example of how lien stripping works:
| Fair market value of home | First mortgage | Second mortgage |
| $250,000 | $260,000 | $50,000 |
In this example, the entire $50,000 second mortgage could be reclassified as unsecured debt and stripped by filing Chapter 13 bankruptcy. The caveat is that you complete the Chapter 13 plan. Language in the orders state that if the Chapter 13 plan is not completed, the lein will remain in effect.
The unsecured portion of your mortgage would be placed with other unsecured debts in your debt repayment plan. The percentage of unsecured debts that you will have to pay will depend on your income and assets. Many people who file Chapter 13 bankruptcy only have to pay back a small percentage of unsecured debts. We would not be able to advise you as to your specific situation without a consultation.
Free Attorney Consultation
To schedule a free initial consultation about your mortgage and possibly stripping a second or third mortgage, call us toll free at 888-326-9553 or fill out the contact form on this web site. Our law office is located in Spring Hill, Florida, in the center of Hernando County.
"We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code."
