People who have a second mortgage here in San Jose and the surrounding areas need to know about Chapter 13 Bankruptcy. You see, if you have a second mortgage, a Chapter 13 Bankruptcy offers a chance to eliminate that lien from your house and that debt from your life. Let’s make sure we understand that sentence I just wrote. Because it’s true. A Chapter 13 Bankruptcy can help you avoid and eliminate a second mortgage on your home.
Wow. Think about that. Many people end up purchasing a home. Then the real estate market will rise substantially, giving that person equity. A nice little bank comes along and provides with a home equity line of credit or a second mortgage. You take the money and use it for necessary repairs or some other expenditure and you have a monthly payment.
A couple years later, the economy crashes and you find that your home value has been destroyed. In a Chapter 13, if your home value falls far enough, then you can use Chapter 13 to eliminate your second mortgage and get a fresh start.
An example of how this can work is that you purchase a home for $750,000. The value goes up to $950,000 and you get a home equity line of credit or a second mortgage for $150,000. You start making payments and in a couple years, the value of your home crumbles. You owe $725,000 on the first mortgage and $140,000 on the second mortgage, but your home is only worth $650,000.
In this situation, the value of the home is lower than what is owed on the first mortgage. The filing of a Chapter 13 Bankruptcy and completion of that case will allow you to eliminate this debt from your home and your personal liability.
This is one of the most valuable tools people can use to reset their home mortgage situation and get people back to having their home actually be an asset.