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If you have credit card or medical bill debt, foreclosure or repossession balances or lawsuit judgments and wage garnishments, Chapter 7 bankruptcy can really help you out. In addition, the bankruptcy process is also far less invasive than most people believe.
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If you have a home or car that you are in danger of losing due to non-payment, Chapter 13 bankruptcy can help you save what you love by getting you current and keeping you there. A Chapter 13 can also take care of any taxes that you owe.
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As bankruptcy concepts become more and more commonplace, people often ask what stripping off a mortgage means. This process is available to those who file a Chapter 13 bankruptcy. The Bankruptcy Code does not allow for the modification of a secured lender’s rights. This makes it seem as though you cannot get rid of any home loans in bankruptcy.
However, there is a way around this language. If your first mortgage is greater than what your home is worth, then technically your second mortgage is not secured by any value in your home. Thus, since they are no longer a ‘secured’ loan, you can modify the lender’s rights in bankruptcy. One such way to modify their rights is to strip off the mortgage from the house. This means that the loan will be deemed unsecured in the bankruptcy, and will be paid as an unsecured debt through the Chapter 13 plan. This is important because many people who file a Chapter 13 are in low percentage plans. This means that unsecured creditors, such as credit cards and personal loans, are only paid this small percentage and the rest of the debt is discharged. Thus, if you have a second mortgage for $50,000 that you strip off, and you are in a 10% Chapter 13 plan, you will only pay $5,000 of this mortgage. The rest of the second mortgage is discharged at the successful completion of the plan. Furthermore, as a Chapter 13 plan lasts three or five years, this $5,000 would be paid off over time and would be more manageable. As the full details and ramifications of this process are outside the scope of this article, you should seek the advice of a bankruptcy attorney Southern California. There is also an added bonus to having the balance of this second mortgage discharged in bankruptcy. If this debt were forgiven outside of bankruptcy, the amount that was forgiven would be taxable. However, a bankruptcy discharge is unique as it does not create a tax liability for debts that are wiped out. This feature of the Bankruptcy Code alone can save you thousands of dollars.
Despite this amazing ability within the Bankruptcy Code to wipe out your second mortgage, there are many issues to be aware of. First of all, the legal process by which you strip off the second mortgage is complicated, tricky, and varies from district to district and even judge to judge. Therefore, always seek the help of an experienced Southern California bankruptcy attorney to strip off a second mortgage. Also, when you are successful at stripping off the second mortgage, it is important to record this order at the country recorder’s office. This proves that the second mortgage is no longer on your home, which assures there are no issues with the title of your property later on. As stripping off a second mortgage is an important and complicated legal issue, always seek out bankruptcy attorneys Southern California, such as those at Wadhwani & Shanfeld, A Professional Law Corporation.