Removing second mortgage liens during bankruptcy
New York residents who are facing overwhelming debt from first or second mortgages may be interested in one way to find debt relief. One specific legal process may allow a homeowner to remove a lien on their home that is held by the second mortgage creditor.
Unsecured debts are generally discharged in Chapter 7 and Chapter 13 bankruptcy, the latter after completing a three-to-five year payment plan. However, a secured lien in the form of a second mortgage on a home could be an issue. In a Chapter 7 bankruptcy, it is generally not possible to remove this lien on the home, while a Chapter 13 bankruptcy allows the debtor to make a special filing to eliminate the lien.
After completion of the payment plan, any unsecured debts are discharged. The second mortgage lien is not automatically stripped from the home, though. Depending on the bankruptcy court jurisdiction, this lien stripping may be accomplished by a simple post-discharge filing with the court. The filing is a request to void the lien on the home under the second mortgage. Some courts have standard forms to allow debtors to easily accomplish this. Once this lien stripping process is completed successfully, some debtors may be able to have the lien removed from their credit report. This is not guaranteed, however, and is often at the discretion of the creditor who may be uncooperative.
An attorney with experience in bankruptcy may be helpful in guiding a debtor throughout this process. The attorney can provide assistance in the filing process as well as representation thereafter during dealings with creditors and other matters.
Source: SF Gate, “How to Strip Away a Second Mortgage Through a Bankruptcy“, Tony Guerra, December 02, 2014