To answer the question of how to get rid of second mortgage lien you should speak with our bankruptcy attorney. However, most of the time, you can get rid of the second mortgage lien by filing a Chapter 13 bankruptcy. This is referred to as chapter 13 lien stripping. The simple rule of thumb is to determine if the value of your house is less than the first mortgage. If you are upside down on your first mortgage, you may be able to file Chapter 13 bankruptcy to remove the second mortgage lien from your home.
When Can a Second Mortgage Be Stripped from Your Home?
Stripping or removing your second mortgage lien requires the value of your home to have declined to a point where the second loan can no longer be secured by your equity in the home. Before you file for bankruptcy, getting a professional appraisal is required to help you determine whether the value of your home is less than the first mortgage. If the appraisal proves that the value of your house below the balance of the first mortgage, a lien strip may be possible.
If the second mortgage lien is partially secured by your equity in the home, then stripping it isn’t possible. In other words, the second mortgage cannot be stripped through bankruptcy if the value of the home is more than the balance owed on the first mortgage.
How to Strip a Mortgage from Your Home
A motion asking the courts to strip a second mortgage lien is allowed after filing a Chapter 13 bankruptcy. Some courts require an adversary proceeding brought about by the debtor in order to strip a second mortgage lien; which means it takes more work on the part of the bankruptcy lawyer. If the lender objects to stripping the 2nd lien, the bankruptcy court usually sets a hearing where both the debtor and the creditor can present evidence about the fair market value and the lack of equity. Additional evidence or a second appraisal may be required if there’s only a slight difference between the value of your home and the balance of the first mortgage.
Courts don’t always agree when a second mortgage will be stripped from the home. Typically, courts require that lien will not be stripped until the bankruptcy is discharged; which occurs at the close of the case. A special motion is usually required for chapter 13 lien stripping. If the court rules in your favor, the unpaid amount will become an unsecured debt, which may be eliminated according to your Chapter 13 plan.
Free Consultation
For more information about how to get rid of second mortgage, California residents can consult with our Los Angeles Bankruptcy Attorney to determine if they qualify; the first consultation is free.
