CAN I GET RID OF MY SECOND MORTGAGE IF I FILE BANKRUPTCY?
Because of the decline in property values over the past few years, there has been a lot of discussion about “lien stripping” of second mortgages. Lien stripping means taking a debt that is secured by a mortgage and converting it to an unsecured debt or quite literally, stripping the mortgage off. This post will discuss the circumstance in which this relief is available through bankruptcy.
It is generally understood that consensual mortgages or deeds of trust on real estate that is one’s principal residence cannot be eliminated through bankruptcy. This is true regardless of whether one files a Chapter 7 or Chapter 13 bankruptcy. In fact, these types of mortgages cannot be modified in any way. By filing Chapter 13, one can take up to five years to make up missed payments, but the amount of the monthly payment, the principal balance and the interest rate cannot be altered.