Can a 2nd mortgage be discharged in Chapter 7?

If you file for Chapter 7 bankruptcy, you cannot get rid of second mortgages, home equity lines of credit (HELOCs), or home equity loans. Filers in the Eleventh Circuit Court of Appeals, are no longer able to strip off (remove) these types of liens in Chapter 7 bankruptcy.

How is a second mortgage connected to the concept of equity?

Second mortgages allow you to access the untapped equity in your home for cash. HELOCs and home equity loans can help pay for big ticket items like college or major renovations. Interest rates on second mortgages are lower than on private loans or credit cards.

Can a second mortgage be removed in Chapter 7?

It’s Fast, Easy and Guaranteed. While it is true that you may be able to strip these off of your home in a Chapter 13, in a Chapter 7 you can’t, but, you may still be able to effectively ignore it (for a while) and keep your home. However, the 2nd Mortgage or Heloc would still have a lien on the property.

What happens to your 2nd mortgage if you file bankruptcy?

It’s simple math, they won’t pay off a $200K loan to get a $150K asset that they can then resell and only recoup $150K and they’d have to pay closing costs to sell it so they’d only net $120K. That would be a loss of $80K plus they would also lose all of the 2nd mortgage too which is probably another $50K or more on top of the $80K.

What to do with a 2nd mortgage lien?

What most clients will do is make an offer to settle the 2nd mortgage lien in one payment, one time with no balance owing afterwards, and you must get that in writing from the bank before you mail your cashier’s check. You might have to take a massive 401k loan in order to be able to make such an offer, but if they take it, it would be worth it.

What happens to a HELOC when you file bankruptcy?

Your 2nd or Heloc has two things over you b) they have a deed of trust or trust deed on the house which is a lien on the house also called a mortgage. If you have filed a Chapter 7 Bankruptcy, then the Chapter 7 discharges the Loan or Promissory Note, which means that the mortgage company or lending bank cannot collect money from you directly.

Can you get rid of second mortgage in Chapter 7 bankruptcy?

Can a Chapter 7 mortgage remove a junior lien?

Chapter 7 Won’t Strip a Junior Mortgage Lien. Lien stripping is the process of removing junior liens (such as second or third mortgages) from your house if the balance of your first mortgage (or other senior liens) exceeds the value of the property.

What makes a second mortgage a wholly unsecured lien?

So they would include second or third mortgages, HELOCs, and home equity loans. What does wholly unsecured mean? A lien or security interest is wholly unsecured if the equity in your property does not cover any of the lien amounts. For example, say your home is worth $500,000, your first mortgage is $550,000,…

What happens when you file for Chapter 7 mortgage?

Chapter 7 Wipes Out Mortgage Debt, Not Mortgage Liens. A mortgage loan is a secured debt. When you entered the loan contract, the lender created a lien on the property by taking the home as collateral to secure payment of the loan. If you don’t pay your mortgage, the lender can enforce its lien by foreclosing on the house.