Eliminate your Second Mortgage Debt
One of the many advantages of a Chapter 13 bankruptcy is the ability to eliminate your second mortgage. Combing the benefits of the discharge order and the motion to value process, a knowledgeable Chapter 13 bankruptcy attorney can assist you in completely eliminating your second mortgage. At Bains Legal, PC, our dedicated Chapter 13 Bankruptcy Attorney Pauldeep Bains has spent countless amounts of hours researching and finetuning the Motion to Value that needs to be granted by the Judge in order to accomplish this goal.
How does this work?
Many homeowners have at some point taken out a second mortgage on their home. Likely when they did so, they had a significant amount of equity in the home in order to get that second mortgage. However, depending on when the home was purchased, many homeowners are now stuck with an underwater home and being forced to make payments to both the first and second mortgage companies.
When a Chapter 13 is filed, the homeowner would be required to provide the Court what their estimation of the fair market value of the home currently is. Through that process, they would need to prove to the Court that the fair market value of the home is less than the amount owed on the first mortgage. If they are able to prove this, the Court will grant the Motion to Value. As long as that homeowner fully completes his/her Chapter 13, the second mortgage lender would be required to reconvey their lien. This has commonly been referred to as “stripping” their second mortgage. Since the second mortgage is now “stripped”, they no longer hold a valid lien on your property.
What happens to the second mortgage?
The “stripped” second mortgage is now treated the same as the general unsecured creditors are in the Chapter 13. For example, if your Chapter 13 plan proposes to pay the general unsecured creditors 5%, that means that each general unsecured claim (i.e. credit cards, medical bills, etc.) in your case will receive 5% of what they are owed and the remaining 95% gets eliminated through the bankruptcy. This same result will occur with your second mortgage.
Let’s say you have a $50,000.00 second mortgage and you are able to prove to the Court that the value of the home is less than the amount owed on the first mortgage. Let’s further assume that you are proposing a 5% Chapter 13 plan. Through the Chapter 13, you would pay to the second mortgage lender $2,500.00 over 3-5 years, the remaining $47,500.00 would be eliminated, and the lien held by the second mortgage lender would be extinguished.
Speak with a Sacramento Chapter 13 Bankruptcy Lawyer
For homeowners that are willing to take the time and discuss their options with a knowledgeable bankruptcy attorney, the potential benefits that they can realize are astounding. At Bains Legal, PC, our commitment to our clients and desire to provide top-quality legal representation remain a top priority. We are committed to showing homeowners that drowning in debt and living in a home with negative equity is not their only option. Local Sacramento Chapter 13 Attorney Pauldeep Bains will spend the time necessary to examine your particular situation and tailor a Chapter 13 Plan that is specific to you and your goals, all while ensuring that you are abiding by the rules of the Bankruptcy Court.
If you would like to learn more about the potential of eliminating your second mortgage, contact Bains Legal, PC, by calling 916-800-7690 or by sending us a message online, and set up your FREE no-hassle consultation with Chapter 13 Bankruptcy Attorney Pauldeep Bains.
We help clients in the following areas: Sacramento, Elk Grove, South Sacramento, West Sacramento, Natomas, Citrus Heights, Antelope, Fair Oaks, Gold River, Rancho Cordova, Roseville, Rocklin, Lincoln, Wheatland, Yuba City, Marysville, Woodland, Davis, and Lodi.