Boca Raton Lien Stripping Lawyer
Pulling out a second or third mortgage can have several benefits, the biggest of which is the low interest rates. Unlike secured personal loans, second mortgages typically have interest rates that are in the single digits. For this reason, if homeowners need additional capital for whatever reason, many pull out a second or even third mortgages on their homes. They then make payments on their second mortgage as they would their first mortgage.
However, it is not uncommon for individuals to default on their second or third mortgages due to rough financial times. When this happens, they risk losing their homes. Fortunately, there is a way that these homeowners can save their homes and get out from under the bank’s thumb, and that is by filing for Chapter 13 bankruptcy. Our Boca Raton lien stripping lawyers can help you with your case today.
How Does Filing for Bankruptcy Help?
If approved for bankruptcy, you may qualify for “lien stripping.” Lien stripping refers to the process of ridding you of unsecured debts. If the value on your home is less than the value of your first mortgage, there is really nothing for the second mortgage to attach to. As a result, it is deemed “unsecured” and, therefore, treated as any other unsecured debt.
What Happens to Your Second Mortgage?
When a mortgage or lien is put on a home, its priority against other liens or debts is determined by which lien was recorded with the county first. In this instance, that would be your first mortgage. If your house was foreclosed on and sold, all proceeds would go to your first mortgage lender and any leftovers to the second lender. However, if your home was worth less than what you owed on it, the first lender would get the entirety of the proceeds and the second lender would have to chalk your debt up as a loss.
But Don’t You Have to Repay Debts Under Chapter 13?
Yes, you do have to repay some debts under Chapter 13—or, at least, as much as you can afford. When approved for Chapter 13 bankruptcy, you will be put on a three to five year payment plan. During the duration of that payment plan, you will be required to use all of your disposable income to make payments towards your debt. At the end of that three to five years, any unsecured debts that are still not paid off will be discharged, even if it is not paid in full. Because subsequent mortgages are often considered unsecured, this gives you the very real chance of getting off the hook for your debt.
Can You Stop Foreclosure With a Chapter 13?
Yes, you can. If foreclosure proceedings are already underway because you are behind on your first mortgage as well as your subsequent mortgages, you still have an opportunity to save your home. Though you cannot modify your first mortgage, as that is considered a secured loan, you can attempt to cure any default payments over a period of three to five years. If you can catch up on your mortgage and continue to make the monthly payments post-bankruptcy, you can save your home.
If You Have More Questions, Contact Our Boca Raton Lien Stripping Lawyers
Bankruptcy can be a powerful tool when used correctly. If you want to benefit from lien stripping and other assistance provided by Chapter 13, contact the Boca Raton lien stripping attorneys at Nowack & Olson, PLLC, today. Contact us by phone or email today.