The elimination of a second mortgage through bankruptcy

The bursting of the housing bubble in the midst of a weakening economy has led to the steep fall of home values. Zillow.com reported that national home values ​​fell by about 12% last year alone. The values ​​at home in Portland, Oregon metropolitan area of about 11% last year alone has decreased, and some districts, such as the Pearl District, have fallen about 20% this year. Many of the homes sold during the housing boom was a "80/20" purchasedMortgages, which means a first mortgage for 80% of the purchase price, and a second mortgage for the remaining 20%.

If the value of the house, under the overall balance of the mortgage before the fall, it is possible in some cases, "strip" the second mortgage in Chapter 13 bankruptcy. A second mortgage can be converted to unsecured debt and could not be fired or considered priority plan liabilities in Chapter 13.

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Example 1: The House paid $ 500,000 fortheir home in 2006, first with a $ 400,000, and a second of $ 100,000. From that point on their home value has dropped to $ 395,000. The owners of houses and apartments could remove the second mortgage debt to eliminate $ 100,000 (probably in a much higher interest rate), and keep their homes.

The elimination of a second mortgage through bankruptcy

Example 2: The House paid $ 500,000 for their home in 2006, first with a $ 400,000, and a second of $ 100,000. From that point on their home value has dropped to $ 405,000. The owners of houses and apartments can not delete secondMortgage because the value of the house and the first mortgage so that the second mortgage is secured by the property.

Stripping the second mortgage is not always possible. But even if a house does not qualify for a "strip down" a second mortgage, may be able to second the conditions of the loan that may be of a high variable interest rate or be renegotiated.

The elimination of a second mortgage through bankruptcy