Underwater On A Second Mortgage? Consider Modifying It In Bankruptcy To Lower Payments

Admin May-4-2010 No Comments »

The housing crisis is in full swing with unfortunately no end in sight. Your nationally chartered bank has recently notified you that you don’t qualify for their new “when pigs sprout wings” mortgage modification program. You have a second and third mortgage, not to mention a first mortgage that alone exceeds the value of your home. Stress is mounting and fast. You are as they say “underwater.” Your kids are in the school district of your choice, neighbors are great and your spouse loves the house. In other words, you do not want to surrender the home. If I’m wrong in this assessment and you’d like to walk away from an underwater home, click here. If your preference is to stay in the home continue reading.

Few people are aware that second and third mortgages can be stripped or modified by filing chapter 13 bankruptcy. If you are underwater on your first mortgage, your second and third lien can be removed through the bankruptcy process often reducing your monthly mortgage payments significantly. In addition, through a chapter 13 plan, it is possible to simultaneously slash credit card debt, often paying it back at pennies on the dollar. Be aware, that under the current state of the law, your first mortgage on your primary residence cannot be modified in bankruptcy. There has been pressure in Congress to change the laws to allow for this, but as of now nothing has been done. Notwithstanding, second and third mortgages are very much in play. If you find yourself in the situation referenced above, ask yourself: would the removal of high interest second and third mortgage payments make it easier to make payments on the house you love? Would it turn the tide to the point where making payments seemed possible again? If you’ve answered yes to either of these questions, it may be time to talk to a bankruptcy attorney to discuss your specific circumstances in detail to see if chapter 13 bankruptcy has the potential to help you and your family. This article provides only a basic overview of the process, if you have questions, it is important to consult an attorney.

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