Helping Fort Lauderdale Residents Handle Mortgages in Chapter 13 Bankruptcy
If you have more than one mortgage on your home, you may have difficulty keeping up with your payments. You may have already defaulted on some or all of your mortgage payments. A Chapter 13 bankruptcy can give you the opportunity to remove a second or even third mortgage. The Fort Lauderdale bankruptcy attorneys at Anidjar & Levine can advise you on the possibility of removing junior liens, such as second mortgages, through Chapter 13 bankruptcy. The attorneys at our firm understand the nuances of bankruptcy law. We can help you determine whether filing for Chapter 13 bankruptcy is appropriate for your specific financial situation.
Removing Second Mortgages in Florida
Many individuals have second or third mortgages on their homes. If you have multiple mortgages and are unable to make your mortgage payments, you may be able to ultimately eliminate or remove your second or third mortgage by filing for bankruptcy under Chapter 13.
When you file for Chapter 13, your debts will be classified as either priority, secured, or unsecured. Priority debts, like child support, cannot be discharged. Secured debts are when a creditor has a lien on your property, while unsecured debts are not secured by collateral. Mortgages are secured debts because your home is collateral on the loan. The mortgage lender can take the property if you default on your mortgage payments.
Although mortgages are secured debt, Chapter 13 bankruptcy provides a way for you to remove your second and third mortgages. This is lien stripping, which is a process by which a court turns secured debt into unsecured debt. By filing for Chapter 13, it is possible to strip a second or third lender’s lien on your property under certain circumstances.
To remove the second or third mortgage, your first mortgage must exceed the market value of your home. In other words, your home must be “under water.” For example, your home might have a fair market value of $300,000. You might have a first mortgage in the amount of $350,000, a second mortgage for $50,000, and a third mortgage for $25,000. Your first mortgage exceeds the value of your home. This means that you can strip both the second and third mortgages. As long as you complete your payments under your debt repayment plan and get a bankruptcy discharge, your second and third mortgages will be converted into unsecured debts.
If the fair market value of your home in this example is $375,000, however, you cannot remove the second mortgage. This is because the value of your home exceeds your first mortgage. However, you can remove the third mortgage because the value of your first and second mortgages in the example equals $400,000, which exceeds the value of a home worth $375,000.
Permanently Removing the Second Mortgage
Once it is stripped, your second (or third) mortgage becomes a non-priority unsecured debt. You will pay a portion of the debt through your Chapter 13 debt repayment plan. After you complete the plan, the debt is discharged. This means you have no obligation to pay it after you receive a bankruptcy discharge. If your bankruptcy case is dismissed, however, you will not be able to remove the second mortgage lien. An experienced South Florida bankruptcy attorney can help you develop a Chapter 13 debt repayment plan that is appropriate and affordable in your case.
Discuss Your Options with Hollywood Bankruptcy Attorneys
At Anidjar & Levine, our Hollywood bankruptcy lawyers can offer you the individualized legal guidance you need in your bankruptcy case. We provide our clients with experienced representation in bankruptcy matters, including Chapter 13 bankruptcy filings. We can discuss with you how Chapter 13 can be used to remove a second mortgage on your home and help manage your unique financial situation. We serve clients throughout West Palm Beach and Miami-Dade County. Call our office at 800-747-3733 to schedule a free initial consultation or complete our online form today.