Chapters

News and views from Virginia Bankruptcy Attorney Russell Adams

Stripping off a second mortgage

In today’s housing market many homeowners find that they owe more on their houses than they are worth.  Despite the attempt by many in Congress to change the Bankruptcy Code to allow Bankruptcy Judges to modify mortgages, all of these attempts have failed.  That does not mean that there is no hope for those who find themselves “underwater” on their mortgages and considering Bankruptcy. 

There is one situation in which a homeowner can “strip off,” or completely get rid of a second and/or third mortgage.  If the value of the house is less than the amount owed on the first mortgage, the inferior mortgage(s) can be stripped off in a Chapter 13 Bankruptcy.  The result is that upon completion of the Chapter 13 plan, the inferior, unsecured, mortgages are “stripped” from the property and no longer constitute liens on the house.  The homeowner exits from the Chapter 13 case with only the first mortgage remaining on the property.  Obviously, this can be a tremendous benefit to the homeowner in the long run and can turn a home that may take decades to increase in value to exceed the mortgages into a home that can have positive equity in just a few years or sooner.

If you find yourself in this situation you should contact The Adams Law Group to discuss your options.

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