If you are considering filing for bankruptcy, you should speak to a Seattle Bankruptcy Attorney in order to learn about all of the options that may be available to you. Debtors who are in need of debt relief my file for chapter 7 bankruptcy or chapter 13 bankruptcy. A chapter 7 bankruptcy allows a debtor to discharge all of their unsecured debt so long as the debt is not considered a priority debt or was incurred from illegal activity. In order to qualify for a chapter 7 bankruptcy, a debtor’s income must be below the median income for their state and family size. With that said, a second mortgage may not be stripped through a chapter 7 bankruptcy.
If you are a debtor looking to strip a second mortgage, you must file a chapter 13 bankruptcy. In addition to being able to strip a second mortgage, a debtor may make up any payments that they are behind through a chapter 13 bankruptcy. A debtor is eligible to strip a second mortgage on a primary residence through a chapter 13 bankruptcy if the primary residence is worth less than the first mortgage, making the second mortgage completely unsecured.
After filing the chapter 13 bankruptcy case, a motion to strip the mortgage must be filed and approved by the bankruptcy court. Having a valuation done on your home will be necessary to determine the actual value of your home. If there is some discrepancy as to the value of the home, you second mortgage lender may object to the motion to strip your second mortgage and argue that the second mortgage is not completely unsecured, and therefore the second mortgage cannot be stripped. If the two sides cannot come to an agreement as to what a home is worth, a bankruptcy judge will determine the value.
If you have additional questions please visit our Seattle Bankruptcy Lawyers homepage to speak to a Washington state bankruptcy attorney.