How Do Strip Off Liens Work?
A high percentage of real estate properties have both a first and second mortgage. Often, the value of the property is actually less than the balance owed on the first mortgage. One of the great benefits of a bankruptcy filing is the opportunity to “strip off” or remove the second mortgage, leaving the property owner with just one monthly mortgage payment. What’s more, with the second mortgage no longer secured by the property, you can turn around a negative equity situation and put value back into your property.
A Practical Example
Here’s an example of how this works: Say that you own real estate presently valued at $300,000. Your first mortgage has a balance of $310,000 and the second mortgage on the property has a balance of $120,000. Clearly, the property is underwater. In this example, the property’s value ($300,000) is less than what is owed on the first mortgage ($310,000), meaning that the second mortgage is wholly unsecured.
By filing a Chapter 13 bankruptcy, you would be able to essentially change the second mortgage from a secured loan into a loan that is unsecured (no longer a lien on the property), thus treating it similar to credit card debt, medical bills, etc. You would no longer be required to make monthly payments on the second mortgage and, when you have completed the bankruptcy, you would be left with only the first mortgage. This means that your property valued at $300,000 will have only $310,000 in liens against it, setting you up to build equity in the property.
Bankruptcy is available to afford individuals the ability to get out from under their debt. In some cases, it can also get you out from under second mortgages. And it does not matter whether this real estate is the house you reside in or an investment property. In either situation, you go from two down to just one mortgage payment, saving you that extra mortgage payment every month and thousands of dollars in the long run.
Free Consultation With A Bankruptcy Lawyer
Contact the Law Offices of Ira C. Yellin, LLC, in Franklin, to schedule an appointment with an experienced Massachusetts attorney to learn more about stripping off a mortgage in bankruptcy. Call us at 508-528-888 or send us an email.
When representing consumer debtors in connection with bankruptcy, the Law Offices of Ira C. Yellin, LLC, is a debt relief agency as defined by the Bankruptcy Code, 11 USC § 101(12A).