You Can Get Rid of Your Second Mortgage
One of the benefits of filing Chapter 13 bankruptcy is removing a second mortgage on your personal residence. This process is called “lien stripping.” You can qualify to “strip” the second mortgage if the balance owed on your first mortgage is greater than the current market value of your residence.
An example is if you purchased your home for $200,000 and the value of your residence has gone down to $150,000. You have two mortgages on your home. The balance owed on your first mortgage is $170,000. The balance owed on your second mortgage is $50,000. Since the balance owed on your first mortgage ($170,000) is higher than the current market value of your residence (“$150,000), you can eliminate (“strip”) your second mortgage.
If you are behind on your mortgage payments and are worried about foreclosure, lien stripping is a powerful remedy provided under bankruptcy law.