Eliminating Your Second Mortgage in Chapter 13 Bankruptcy
Has your house decreased in value so much that you owe more on your mortgage than the house is worth? Do you also have a second mortgage? You are certainly not alone. The current real estate market has left many people in the same situation you are in. Thankfully, there is an option available when you file Chapter 13 bankruptcy. That option is stripping your second mortgage.
At the Arizona Law Group of Trezza & Associates, we can advise you on whether you qualify for Chapter 13 bankruptcy and are eligible to strip your second mortgage. Contact us to set up a consultation with one of our attorneys.
What Is the Fair Market Value of Your House?
The first step to determining whether you qualify for stripping of your second mortgage is to determine the fair market value of your house. We will do an appraisal, which may mean finding a comparable house. We also need to know how much you owe on your first mortgage. If we find that, for example, the value of your house is $200,000, but you owe $250,000, we will be able to strip your mortgage, no matter how much that mortgage is. This is an option only available in Chapter 13 bankruptcy.
How Stripping Second Mortgages Is Possible
People wonder how it is possible to simply get rid of an entire second mortgage. In Chapter 13, there is something called "the best interest of the creditors test." This test involves asking the question: If a person filed Chapter 7 bankruptcy, what would the creditor get? The creditor needs to come out of Chapter 13 in the same position. Since Chapter 7 involves liquidation, the house would be sold for the fair market value, and the second mortgage lender would get nothing. The creditor is in the same position if the mortgage is stripped.
Contact Us About Arizona Stripping Second Mortgages Information
Every case is different, so it is important to discuss your situation with a Tucson debt relief lawyer before making a decision. Contact us to discuss your options.
