CALL NOW!
FREE PHONE/VIRTUAL CONSULTATION

How Bankruptcy Affects a Second Mortgage

There are many homeowners who have a second mortgage on their homes. In many of these cases, these mortgages were not taken because a person was facing financial challenges. For instance, some use a second mortgage to pay for home renovations. Second mortgages can be used to help someone through a difficult financial time, but they are also an investment tool that allows you to borrow against the equity in your home.

To read more about the pros and cons of having a second mortgage, check out this article from thebalance.com.</a>

Unfortunately, because financial struggles are hard to predict, there are those who bought a home they could afford, took out a second mortgage, and later found they were unable to afford their mortgage payments. In these cases, bankruptcy might be the best way to deal with foreclosure threats that include a second mortgage.

Eliminating Your Second Mortgage through Bankruptcy

Many bankruptcy attorneys have helped homeowners use a provision within bankruptcy laws to eliminate their second mortgage and stop foreclosure efforts on their home. Though there is limited data on how frequently this occurs, many familiar with the industry report there was an uptick shortly after the housing market crashed.

Depending on the type of bankruptcy you qualify for, some or all of your debts will be eliminated. For most homeowners, filing for Chapter 7 bankruptcy is not an option because they want to keep their homes. However, because second mortgages are handled differently than first mortgages, it might be possible to use bankruptcy to eliminate your second mortgage when you file for Chapter 13 bankruptcy. Second mortgages are considered unsecured debt when there is no equity to cover them, which is the case for millions of houses in the country today.

It can be an especially useful tool for homeowners who are underwater – meaning they owe tens of thousands (sometimes hundreds of thousands) of dollars more in mortgage loans than their home is now worth. Once their Chapter 13 payment plan is complete, their second mortgage is eliminated and they have the opportunity to make a fresh start in a home with a mortgage that is more in line with the home’s value.

Managing Unrealistic Mortgages after the Housing Bubble Burst

Mortgage lenders aren’t thrilled with this advantage, considering it can cost hundreds of thousands of dollars, but bankruptcy attorneys report the law has been like this for years. It was rarely used in the past because there was usually enough equity in the home to cover a second mortgage, but with the housing bubble this is no longer the case for many homeowners. And many people in the industry are reluctant to give mortgage lenders much sympathy for their losses because in many cases, they signed off on loans that should have never received approval.

So what should you do if you are facing foreclosure or considering bankruptcy and you have a second mortgage? You might have the opportunity to take advantage of the bankruptcy provision on second mortgages, but chances are it will be tough without the guidance of an experienced bankruptcy attorney.

If you have questions about second mortgages and how they are handled in bankruptcy, or questions about bankruptcy in general, we can help. Contact the Law Offices of Robert M. Geller at 813.254.5696 to schedule a consultation.

Archive

Tampa Bankruptcy Law Blog

How Does Claiming Bankruptcy in Florida Affect Your Children?

Claiming Bankruptcy in Florida Understanding how claiming bankruptcy in Florida affects your children is an important part of determining whether...
Read More

Claiming Bankruptcy in Florida: What Happens When You File for Bankruptcy and Your Spouse Does Not?

Claiming Bankruptcy in Florida You already know how much the things you do affect your spouse when you are married....
Read More

Should You Pay Back What You Owe Loved Ones Before You File for Bankruptcy?

Florida Bankruptcy Laws It’s common for people who are struggling financially to turn to their friends and family for help....
Read More

Bankruptcy and Family Law: Does Filing Affect the Child Support I Pay or Receive?

Bankruptcy and Family Law If you’re like many people, the well-being of your children is your most important priority. Struggling...
Read More

5 Tips for Overcoming the Emotional Toll of Bankruptcy

Florida Bankruptcy Attorney Getting through the bankruptcy process is about more than just improving your finances. Working with a Florida...
Read More

Bankruptcy and Divorce: The Far-from-Perfect Storm

Bankruptcy and Family Law Bankruptcy and divorce separately are two of the most stressful events you can experience in your...
Read More

Does the Pandemic Have You in a Holding Pattern? Here’s How to Know When to File for COVID Bankruptcy

COVID Bankruptcy If you’re struggling to make ends meet and you feel as if your life is on hold because...
Read More

Will Your Favorite Retailer File for Business Bankruptcy in 2021?

Business Bankruptcy 2020 was a tumultuous year and many of the financial challenges caused by the pandemic are expected to...
Read More

Boosted and Extended Benefits Keeping Unemployed Afloat – But For How Long?

Unemployment Benefits Were you one of the millions of people who ended up out of a job and using unemployment...
Read More

Should Bankruptcy Laws Be Adjusted Because of COVID-19?

Bankruptcy Laws The COVID-19 pandemic brought a lot of changes throughout 2020 and many are expected to continue into 2021...
Read More

Bankruptcy

For The Next 5 Days GET A FREE BOOK About Bankruptcy

Learn More

Infographics

We are A Debt Relief Agency.
We help people file for bankruptcy under the Bankruptcy Code

Pay Online Bankruptcy Courses Newsletter Subscription

NACBA Logo avvo1 avvo2 avvo3 LEA BBB Logo RG Seal

Call For A Free Initial Consultation

813.254.5696

Tampa Office

Law Offices of Robert M. Geller, P.A.
807 West Azeele Street
Tampa, FL 33606
T: (813) 254-5696
T: (800) 853-7549
F: (813) 253-3405

Map And Directions

St. Petersburg Office

Law Offices of Robert M. Geller, P.A.
125 5th Street South
(Wells Fargo Financial Center)
2nd Floor, Suite G
St. Petersburg, FL 33701
T: (727) 532-3939

Map And Directions

Pasco Office

23526 State Road 54
Lutz, FL 33559
T: (813) 336-2320

Map And Directions