If you are a Florida homeowner facing financial difficulties that put you in the frightening position of possibly having your home foreclosed upon, you may wish to consider Chapter 13 bankruptcy as a way to prevent foreclosure. If you have both a first and second mortgage, Chapter 13 may likewise allow you to get your second mortgage discharged and any lien on your home having to do with that second mortgage stripped.
HomeGuides explains that second mortgage lien stripping is one of the options available to a Chapter 13 bankruptcy court.
Chapter 13 procedures
You likely already know that Chapter 7 represents a discharge procedure whereby the bankruptcy court discharges virtually all of your consumer debt, including your credit card debt. What you may not know, however, is that Chapter 13 works far differently. Here, instead of your purpose being to discharge debts, your purpose is to reorganize and renegotiate your various debts so as to pay them off or substantially down over a significant period of time, usually three or five years.
Once you file Chapter 13, the first thing you do is to meet with your various secured creditors, including your first mortgage holder, to negotiate a significant reduction in your debt balances and/or in the interest rates you pay for these loans. You do not, however, have to meet with your unsecured creditors, such as your second mortgage lender, who hold no security for your loans with them.
After your negotiation meetings, you develop a plan to repay your secured creditors over time. The court must approve this plan before it can go into effect. After that, you simply stick to your plan, paying your secured creditors in accordance with it.
As for your unsecured creditors, including your second mortgage lender, you do not need to pay them anything under your plan unless you specifically mention them in it. Assuming you did not include your second mortgage lender in your plan, (s)he has little to no chance of recovering the amount of your loan. In fact, when your bankruptcy period ends, the court will discharge all of your unsecured debts and can strip any lien your second mortgage holder placed, or attempted to place, on your home.
This is general educational information and not intended to provide legal advice.
