Modifying Second Mortgage Liens in Chapter 13 Bankruptcy

If you are one of the many New York homeowners who purchased your primary residence with 80/20 mortgages, or if you took out a second mortgage in the past few years, did you know that you may be able to remove the second mortgage lien from your home in a Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy offers an important, and often unknown and over-looked, option to consumers who have second and/or, perhaps third, residential real estate mortgage liens on their primary residences – namely, that of removing those junior liens from your home.

If the current fair market value of your home (as determined by an appraisal prepared by a licensed real estate appraiser) is below the present outstanding balance on your first mortgage (including arrears, if applicable), the second mortgage lien can be “stripped”, and the debt associated with it can be reclassified as a unsecured debt (such as credit card debt, etc).

In most Chapter 13 Bankruptcy cases, only a small portion of this type of debt is paid over a 3 to 5 year period. Immediately upon the successful completion of your Chapter 13 payment plan, the second (junior) mortgage lien shall be permanently removed from your property by Order of the Bankruptcy Court. Please be aware, though, that in order to qualify for this benefit, you must meet the usual and customary qualifications for Chapter 13 Bankruptcy.

As your New York bankruptcy lawyer with a background in real estate finance, I can help you navigate this rather complex issue. Contact my office today to schedule your free initial consultation.