Lancaster Second Mortgage Lawyers
Many southern California homeowners take out second mortgages on their property. This often takes the form of a home equity line of credit (HELOC) that provides quick access to cash to finance a large purchase, such as a home renovation or paying for a child’s college education. Because second mortgages are subordinate to the original mortgage, in the event of a foreclosure the primary lender must be repaid in full before the secondary lender sees a penny.
If you are currently faced with mounting debts and a home that is considered “underwater”–i.e., it is now worth less than the value of your first mortgage–it is possible to get rid of your second mortgage through bankruptcy. A qualified Lancaster second mortgage lawyer can review your financial situation and advise you of your options. At Wadhwani & Shanfeld, we have helped many Los Angeles County debtors obtain relief from second mortgages, either by negotiating directly with the lender or seeking to discharge the debt in bankruptcy.
Is Lien Stripping the Right Option for You?
In Chapter 13 bankruptcy, it is possible to cancel a second mortgage through a process known as “lien stripping.” This is only an option when the balance of the first mortgage exceeds the value of the property secured by the loan. In this scenario, the bankruptcy court will convert the second mortgage to an unsecured loan, effectively “stripping” it of its secured debt status.
To give a simple example, say you purchased a home for $300,000 via a mortgage loan. You later took out a home equity line of credit for $60,000. But your financial situation later takes a turn for the worse and you need to file for Chapter 13 bankruptcy. At the time you file, you still owe $200,000 on the first mortgage but your house is now only worth $150,000. Since the balance of your first mortgage is more than the current value of your home, the bankruptcy court will strip your second mortgage.
Lien stripping does not eliminate a second mortgage debt. But it does mean you will not have to make any payments on the second mortgage outside of bankruptcy. And depending on the terms of your Chapter 13 payment plan, you may end up paying only a small fraction of what you owe. And once you complete your plan, any remaining debt on that second mortgage can then be discharged.
Contact Wadhwani & Shanfeld Today
Bankruptcy is an option of last resort. If you are running behind on your second mortgage payments, it may be possible to negotiate a deal directly with the lender. Especially if your house is currently underwater, the lender may agree to modify the terms of your loan rather than risk a bankruptcy filing that could leave it with just pennies on the dollar.
Before talking to your lender, however, you should consult with an experienced Lancaster second mortgage attorney. Contact Wadhwani & Shanfeld today to schedule an initial consultation with a member of our team.