Stripping mortgages

Would getting rid of a second mortgage make keeping your house more feasible?  Eliminating a junior mortgage is something we can do though bankruptcy in this down market.  Take this example: Your house is worth $500,000 and you have a first mortgage of $600,000 and a second mortgage of $150,000.  In a chapter 13 bankruptcy, you could “strip” the lien of the second mortgage because the second has no equity securing it.  While the second mortgage debt does not go away, if you successfully complete your chapter 13 plan, the lien will be removed from your home and the second mortgage debt would be discharged as part of the bankruptcy.

So in short, to strip a junior mortgage, your house must be worth less than your first mortgage, you must file a chapter 13 bankruptcy, you must keep up with your first mortgage payments (and cure any arrears through the plan), and you must complete your chapter 13 plan. No loan modification can give you this.

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