A Chapter 13 and second mortgage lien can be a great combintation. If the balance of the first mortgage is higher than the fair market value of the home, the homeowner can “strip” the second mortgage lien. This means that after the homeowner successfully completes a chapter 13 bankruptcy plan, the second mortgage lien will be stripped, or entirely removed from the property. The debt that is secured by the second mortgage lien is paid as an unsecured debt (like credit card debt) during the chapter 13 bankruptcy plan. At the end of plan, any remaining unpaid balance is completely discharged, or eliminated. The result of this is that a homeowner is able to completely eliminate a seccond mortgage lien on thier home by completing a chapter 13 bankruptcy. Owners of investment property may also get this relief.
Today was a good day for my client, who has been in chapter 13 bankruptcy since January of this year: her chapter 13 plan was approved by the bankruptcy court. When she first came to my office to speak with a bankruptcy attorney , she didn’t know she needed a chapter 13 bankruptcy. She only knew that she didn’t have enough income to pay her debts, and that it was likely that she would never pay them off with her salary from the Orange County School System. She had heard about chapter 7 bankruptcy and thought that would help her discharge excessive credit card debt and give her a fresh start in her financial life. What she didn’t know about is how she could significantly improve the mortgage financing on her home, by stripping the second morgtgage lien. It took me some time to help her understand that a Chapter 13 plan was the best option for her.
Have you noticed that mortgage foreclosure in Orlando is still occurring at record levels? Isn’t it time that someone do something about all the underwater homes in our community? Well you can – Sign the petition to support an intelligent solution! The National Association of Consumer Bankruptcy Attorneys is advocating for a solution to the mortgage foreclosure crisis. May be your mortgage isn’t in trouble, but your neighbor’s might be. Help your neighborhood and sign the petition today!
Mortgage modification was first introduced by the Obama administration as a solution to mortgage crisis in 2008. Since that time, the program has been criticized as a failure, due probably in part to the fact that banks are not required by law to actually grant a modification, and because there is no legal enforcement mechanism to penalize banks who fail to follow the program’s guidelines. Now, a new program in Orlando offers a ray of light to homeowners who use chapter 13 of the bankruptcy code to help save their home and manage debt.