Call Now!
Call Us 414-326-9231 608-260-7133 Text Us 414-326-4709
${site.data.firmName}${SEMFirmNameAlt}

Chapter 13 bankruptcy may allow a second mortgage to be stripped

Wisconsin homeowners may be interested to learn that, under certain circumstances, the Bankruptcy Code provides the opportunity to actually discharge a second mortgage by filing for Chapter 13 bankruptcy. This is available to those who are able to meet the terms of the qualification process. Once a filer is approved, the court may change a second mortgage from secured to unsecured debt. In so doing, the debt may be discharged as part of the Chapter 13 bankruptcy process.

If the value of the house has dropped to a level that is lower than the outstanding balance on the first mortgage, an individual may qualify for having the lien on the second mortgage stripped. To achieve this, the homeowner must file for Chapter 13 bankruptcy under which ownership of the home can be maintained as long as the first mortgage payments remain current. One of the criteria for qualification for Chapter 13 is proof that the homeowner's income will cover obligations for secured debts, such as auto loans and the first mortgage, along with living expenses; there must also be additional funds to apply toward other debts.

In filing for bankruptcy, the homeowner must draft and submit a repayment plan for the court's approval. A separate motion must be filed with the court to get the second mortgage lien stripped. Upon approval of the motion, the second mortgage will be changed to an unsecured debt by the court. The holder of the second mortgage will be ordered to remove the lien from the property. Once the payment plan is approved, the payments must be made over a period of three to five years, and the court will order the amount to be paid to the second mortgage holder.

Upon completion of the payment plan, the court may discharge any remaining debt on the second mortgage. An experienced bankruptcy attorney can provide additional information related to the eligibility for a Chapter 13 bankruptcy filing, such as the requirement to complete a government-approved credit-counseling program prior to filing. With professional guidance and support, a Wisconsin homeowner can look forward to emerging from bankruptcy in a much improved financial disposition.

Source: homeguides.sfgate.com, "How to Strip Off a Second Mortgage", Amber Keefer, Dec. 26, 2015

No Comments

Leave a comment
Comment Information
Email Us For A Response

Free Case Evaluation

* indicates required field

Miller & Miller Law, LLC
  • VISA
  • Master Cards
  • Discover
Milwaukee Office map Madison Office map Kenosha Office map

633 W Wisconsin Ave, Suite 500
Milwaukee, WI 53203

Phone: 414-312-6581
Fax: 414-277-1303
Milwaukee Office

2810 Crossroads Drive
Suite 4001
Madison, WI 53718

Phone: 608-260-7133
Madison Office

6123 Green Bay Road
Suite 210
Kenosha, WI 53142

Phone: 262-326-1669
Kenosha Office

Appleton Office
4321 W. College Ave.
Suite 200
Appleton, WI 54914

Phone: 920-280-3838
Appleton Office

Brookfield Office
200 S. Executive Drive
Suite 101
Brookfield, WI 53005

Phone: 262-261-0665
Brookfield Office

Glendale Office
6001 N. Green Bay Avenue
Glendale, WI 53209

Phone: 414-973-8662
Glendale Office

Fax: 414-277-1303 - We also have offices in Appleton, Glendale and Brookfield to better serve you.