Buy & Sell your home with Bliss!

This was a newsletter that I received from the Law Offices of Jim G. Price, I thought it was very informative and I wanted to share it.

STRIP THAT 2nd MORTGAGE FROM YOUR HOME

As we all know, many homes have negative equity, especially in East County where homes can be several hundred thousand dollars under water. For the owners of these homes, even when the market improves, it may take years before any positive equity is gained. Homeowners in this situation may want to consider stripping the 2nd mortgage off their home through a Chapter 13 bankruptcy. Lien stripping is made available in a Chapter 13 case pursuant to 11 U.S.C. Section 1322(b) (2). While this is available for 2nd mortgages, it can not be used to strip or modify the 1st mortgage.

To be available for this relief, the current value of the home must be equal to or less than the amount due on the 1st mortgage, so there is no value in the house for the 2nd mortgage and it is effectively unsecured. For example, let’s assume a home in Brentwood is now worth $350,000 and there is a 1st mortgage for $400,000 and a 2nd mortgage for $100,000. Since there is no value in the property for the lender on the 2nd mortgage, it may be stripped off the property. After completion of a Chapter 13 bankruptcy, the property would only be subject to the 1st mortgage.

Of course, in order to obtain this relief a Chapter 13 has to be filed by the homeowners, but depending upon their financial condition and the amount owed on the 2nd mortgage, it may be an option worth considering.