In life, financial situations occur that you never expected to experience. During these times, paying your first mortgage may become difficult, thus making paying a 2nd mortgage intolerable.
However, there is no reason to lose hope, as most mortgage lenders are willing to negotiate ways to help you through difficult financial times. The last thing a family wants to do is lose their home, and lenders know this. Lenders also don’t want a bad loan on their books, and having to incur the cost of foreclosure.
Looking for ways to eliminate, or reduce, 2nd mortgages is not uncommon today, and your mortgage company may already have programs in place to help you out. By working with your Plymouth bankruptcy lawyer, you may be able to negotiate new terms that make paying the 2nd mortgage more feasible. Once these new terms are agreed to, your 2nd mortgage payments will become current, and you’ll end up with a more tolerable payment.
There are however three steps to consider regarding a 2nd mortgage before taking more drastic legal measures.
- Try to pay more than the required monthly payment (if you can do so) – Especially if your 2nd mortgage has a higher interest rate than your first mortgage (or it has a variable interest rate). Extra payments will usually go directly towards the principle of the loan.
- Take out a refinance loan – Interest rates currently are at an all-time low, and by consolidating both mortgages, you’ll end up paying less on a single loan than you do for both currently. With today’s low-interest rates, this option should be investigated.
- Examine your monthly income, calculate your expenses, and do some comparisons. If you are struggling with your finances, negotiate with your lender. It might be possible for you and your bankruptcy lawyer to negotiate a settlement on your 2nd mortgage and have a portion of your debt forgiven. You may also qualify for a current loan modification from your lender.
If none of the above financial strategies work for you, you can usually eliminate your second mortgage by filing for Chapter 13 bankruptcy. This is possible due to a legal process that is known as lien stripping. There are certain rules for lien stripping that need to apply to your specific financial situation.
It is always in your best interest to consult with a Massachusetts attorney that specializes in modifying or eliminating 2nd mortgages. They will have the most current information and be aware of your specific financial details, and can then provide you with the best options for you to consider.
What is Lien Stripping, and How Can I Use It to Eliminate My 2nd Mortgage?
Lien stripping is a legal strategy that allows you to rid yourself of 2nd or 3rd mortgages or any “junior liens”. It is especially valuable to you if you are upside down in your home’s value, meaning your current mortgage (or mortgages) exceeds the current market value of your home.
Using “lien stripping”, the Massachusetts bankruptcy court takes your 2nd mortgage (which is a secured debt guaranteed by your home) and converts it to an unsecured debt by ordering the lender to remove its current lien from your property. In conjunction with Chapter 13 bankruptcy, this can work extremely well.
Be sure, however, that you consult all the details of this legal maneuver with your professional Plymouth or Massachusetts bankruptcy attorney. Only then will you know if it is the right financial path to follow.
Exactly, How Does “Lien Stripping” Work?
Lien stripping can only usually be used to strip your 2nd (or 3rd) mortgage if the amount of the senior liens on the property exceeds the home’s current market value. For example, if you have a 1st and a 2nd mortgage on your house, your first mortgage balance usually must be more than the current market value of your home, before you can rid yourself of your 2nd or 3rd mortgage.
If your house, however, currently is worth more than your first mortgage, but not more than the combined balance of your 1st and 2nd mortgages, then the Massachusetts courts may not allow this tactic to apply. The numbers involved here are everything, and by knowing all the financial details, your Plymouth bankruptcy attorney will help you compile them and present them to the court.
So, Will Chapter 13 Bankruptcy Help Me Eliminate My 2nd Mortgage?
By filing chapter 13 bankruptcy, you may be able to avoid paying down a 2nd or 3rd mortgage. This is because most bankruptcy courts will consider a 2nd mortgage to be a secondary debt that can’t be collected until all primary debts have been settled. Since most people file bankruptcy with few assets and little in the way of liquid funds, secondary creditors usually choose to simply write off their debts at the beginning of the bankruptcy proceedings.
Legally, this can be sticky, as you certainly don’t want to lose your home to your primary mortgage lender. You most likely will eliminate your 2nd mortgage though. There are definite legal circumstances, where it is possible to eliminate your 2nd mortgage and keep your home. If your home’s fair market value has dropped by more than the value of your second mortgage, then the bankruptcy trustee most likely will consider the 2nd mortgage debt wholly unsecured.
However, you are dealing with your home, and it is imperative to consult with a Plymouth, or Massachusetts attorney whose professional and honest guidance will assure you make the best decision possible.
I Want to Eliminate My Second Mortgage, How Should I Proceed?
You are dealing with significant issues here, and the home of your family. So, you want to have all the facts so that you can make the best legal and financial decisions possible.
Benner and Weinkauf, P.C. are established bankruptcy lawyers in Plymouth, Hyannis, New Bedford, and other parts of Massachusetts.
One of their areas of expertise is in dealing with all the aspects of eliminating or mitigating 2nd mortgages. A detailed consultation will get you on the right legal path to solve this problem rapidly and in the best way possible.