How to Effectively Wipe Out Second Mortgages and Lines of Credit, Avoid Foreclosure and Stay in Your Home




By Omar J. Arcia, Esq.
Foreclosure Defense and Consumer Bankruptcy Protection Attorney

Thousands of homeowners in our community are now upside-down on their home mortgages and are looking for a way out.  Some are frustrated in their attempts to modify their home loans, and others simply choose to give up their home.  Wouldn’t it be much easier to save your home if you only had a first mortgage and no other payments? Also, if the market turns around, think of all the equity you could build back up years from now?

For homeowners who have taken out a second mortgage on their home and lines of credit, facing our current economic climate can be particularly challenging.  Additional liens on your home beyond your initial mortgage, however, can be wiped out through a Chapter 13 personal bankruptcy filing. When a judge removes mortgage liens from a property during bankruptcy proceedings it is referred to as “stripping” the lien, a “cram down” or “strip down.” In a Chapter 13, second mortgages and lines of credit against a principal residence, can be stripped down to the appraised value of the home.  Many bankruptcy courts follow a rule that makes a second mortgage totally unsecured if the first mortgage exceeds the value of the personal residence.

To qualify, the court will generally require proof that the home is appraised for less than the value of the first mortgage, which can be established through a certified appraisal that is accepted by the court. In an environment where home prices in most markets have fallen at least 30% or more, many borrowers qualify for this option.

Tax liens can also be stripped off in Chapter 13 reorganization proceedings to the extent that the lien does not attach to equity in the property.  More importantly, if your income level qualifies, you will be able to catch up on any past due debts (including your home mortgage) through affordable payments spread out over the 3-5 year life of the Chapter 13 bankruptcy plan.  Most importantly, none of your creditors will be able to contact you or proceed with a foreclosure during this bankruptcy protection period.

The Arcia Law Firm is privileged to successfully represent dozens of homeowners in our community.  If you are struggling to make your monthly mortgage payments, or if you just received a foreclosure summons, contact the Arcia Law Firm .  We may be able to help you achieve a long term solution to your personal mortgage crisis.


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