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Dealing with second mortgage arrears in bankruptcy

On Behalf of | Jun 21, 2016 | Chapter 13 Bankruptcy, Firm News

Many Florida residents who are behind on the payments for their first mortgage loans are also having difficulty making payments on their second mortgage loans. Fortunately, there is a way to deal with second mortgage arrears. Filing for Chapter 13 bankruptcy could help eliminate a second mortgage, but only under certain circumstances.

During challenging financial times, many Florida residents took out second mortgages to make ends meet. When the housing market collapsed, far too many homeowners discovered that their homes were now worth less than they owed. Not only did homeowners in this situation lose their equity, but they also became victims of the Great Recession. People lost their jobs and/or any wealth they had accumulated, which only further jeopardized their financial situations.

The result was that many here in the state became unable to make their mortgage loan payments. Lenders began demanding payment. Struggling homeowners received calls from creditors and collection agents, and then their lenders threatened to foreclose on both first and second mortgage loans.

Chapter 13 bankruptcy is often used to help homeowners remain in their homes and restructure their debt. However, it may also be possible to deal with second mortgage arrears by “stripping the second mortgage,” which is possible if the homeowner has no equity. It would be beneficial to contact an attorney in order to ascertain whether your circumstances qualify you to benefit from this process. In many cases, a valuation hearing will be ordered by the court. In advance of such a hearing, it will most likely be necessary to have the property appraised, among other things.

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