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Bankruptcy Attorneys Serving Southern California

Pt. 2 - Keeping Your Home and Mortgage Effects of Bankruptcy

Part 2 of series with Doug Minor. Bankruptcy Attorney Greg Shanfeld discusses the effects of bankruptcy on your home and mortgage.


Doug Minor: Hey Everybody, it's time for Consumer Credit TV. I'm your host Doug Minor, the internet's most passionate credit show. We're here to help you, the consumer, with your credit.

Today, we are going to talk to Greg Shanfeld, about what's going on in our economy and what's happening to people's real estate and how it relates to bankruptcy, and if they can save their home through a bankruptcy.

Greg, can you tell us a little bit about, the questions that come in are, how can I save my house, what's going to happen with my mortgage, go into the generalization to help us understand what's going to happen in a bankruptcy with our house and our mortgages.

Greg Shanfeld: Well, certainly in today's economy, there are a lot of people struggling out there to keep their homes, and most of the people that we do meet with want to keep their homes. And we see varying fact patterns. Some people are way behind on their mortgage and are facing foreclosure. Some people are current but they are concerned with how a bankruptcy might affect their ability to keep their house.

But in general, bankruptcy can be used as a very effective tool to help people keep their homes. Chapter 13 is the most common factor that we use to reorganize on back payments and what's keeping us very busy today, is in a lot of cases, we can actually eliminate somebody's second mortgage.

Doug Minor: Really? I want everybody to understand this when you say eliminate, they don't have to repay any of this second mortgage?

Greg Shanfeld: It's done. What we do is, by showing that the value of the home is worth less than what is owed on the first mortgage, we can then treat the second mortgage like we do a credit card, or an unsecured obligation, and wipe it out entirely.

Doug Minor: Wow, now here, Greg, I need you to clarify this for me. We talked in an earlier post about Chapter 13 or Chapter 7. Now if somebody files a Chapter 13 and they reorganize this mortgage, are they still able to eliminate that second mortgage under a Chapter 13?

Greg Shanfeld: Yes, in fact, that's the Chapter they have to do it under. A Chapter 7 is not going to help them strip off or eliminate a second mortgage. It has to be done in a Chapter 13 or in certain bigger cases, Chapter 11. But in Chapter 13 we can reorganize on the back payments owed on the senior mortgage, and at the same time, propose a strip off or eliminate the second mortgage.

Doug Minor: Hey, a question that the viewers have asked. When you go through a process like this, does the first mortgage - do they actually modify the mortgage like a loan modification? How does that process actually happen?

Greg Shanfeld: In a Chapter 13, the terms of the senior mortgage or the first mortgage, aren't modified through the bankruptcy. But if somebody is behind and facing foreclosure, we can half the foreclosure process, reorganize on the back payments and pay it off over a 3 to 5-year period, which is generally affordable to people, especially if we combine that with wiping out a second mortgage and other debt.

Doug Minor: Yeah, okay that makes sense. Now, I gotta be clear on this. Are you still able to wipe out the credit card debt when you do a Chapter 13?

Greg Shanfeld: You can do all sorts of creative things in Chapter 13. What you ultimately propose in the plan depends on the specific situation. But very often, we are proposing plans that are only reorganizing on back payments on a mortgage or a vehicle that the debtor wants to keep. And at the same time, we are paying back nothing to unsecured creditors.

Doug Minor: That's great. At least then, the consumers get to keep their homes. You know, they can afford it probably at that point. They've reduced their other debts so now they can at least stay in their home and if they've been able to wipe out their second mortgage that's made them upside down on the property, could be a good option for somebody.

Greg Shanfeld: Yeah, we're seeing it all the time.

Doug Minor: Hey, listen, I hope this was very informative for everybody. Greg, I want you to tell everybody how they can get in touch with you.

Greg Shanfeld: Thanks for having me today. My name is Greg Shanfeld. My firm is Wadhwani & Shanfeld. You're welcome to call us toll-free at 800-958-6760 or you can drop us an email at

Doug Minor: Super, thanks Greg. Thanks for watching everybody. Call us here at the office. 800-679-1505 and keep emailing us your questions at If there are other topics that we haven't touched on today that we want to go deeper on also, let us know that. Thanks for watching!

Watch Part 1 of the series here.