The real estate bubble in the mid-2000s created a unique situation where many homes are worth less than the combined mortgage balances. Home-equity loans are considered mortgages for the purpose of this article. This lack of equity in the home is known as being “underwater”. If you are underwater, you are trapped in your home and forced to pay the debt service to the bank for a home without equity. The attorneys at the Law Office of Stephen Ross know how to use the bankruptcy code to the advantage of their clients and eliminate a second or third mortgage on a home. This can be accomplished through a Chapter 13 bankruptcy through a separate legal proceeding where a judge may determine the value of the home is below a level that requires payment of the second or third mortgage. At the end of the Chapter 13 plan, the mortgage is satisfied at the recorder of deeds and is forever discharged.
The stripping of a second or third mortgage through Chapter 13 bankruptcy requires a particular situation to be effective. The homeowner cannot have equity in the home based on current real estate values when considering the age and condition of the home. Second, without accounting for the payment of the second mortgage every month, the homeowner should not have additional surplus of funds after payment of the first mortgage and other monthly expenses. These are very general rules, and in all cases, a free consultation with an attorney at the Law Office of Stephen Ross will provide you with an analysis of whether we can strip a second or third mortgage off of your home.
In some cases, clients that qualify for Chapter 7 bankruptcy to eliminate credit cards and taxes are filed under chapter 13 bankruptcy. This allows the client to discharge credit cards, taxes, and a mortgage, relieving a major burden on the client and their family!