In 1992, the United States Supreme Court held that persons filing a Chapter 13 personal reorganization can strip off and terminate a second residential mortgage under certain conditions. The process begins by filing a petition for Chapter 13 before the United States Bankruptcy Court for the Western District of Missouri. At that time, the debtors and their attorney file a plan with the court to repay creditors all or part of the money that is owed from future earnings. The repayment plan can be from three to five years. The length of the plan and the amount of the payment depends on numerous factors including your income and the amount of debt.
In order to strip off a second mortgage, the debtor's attorney must be able to prove to the court that the fair market value of the residence is less than the amount owed on the first mortgage. We will gather that proof through a professional appraisal. Assuming we obtain the necessary proof, we will then file what is essentially a lawsuit in the bankruptcy court against the holder of the second mortgage seeking a judgment to remove its lien from the residence. The holder of the second mortgage has a chance to respond. The only real issue is the value of the property. If the court finds that the balance owed on the first mortgage is less than the value of the second mortgage, an order will be entered removing the lien. It does not matter whether the lien is a home equity line of credit, a purchase money loan, or any other loan or mortgage filed against the residence.
If you live in Southwest Missouri and would like to find out more about removing a second mortgage from your residence, please call our office for a free consultation.
