Most of us don’t have the idea that if we want, we can remove second mortgage in bankruptcy along with eliminating all our unsecured debt like credit card debt. But the fact is that if you bought your home in the last 3/4 years; with a finance of 80% mortgage & 20% second mortgages, or if you have taken out a second mortgage, it is possible to remove your second mortgage liens from your home through chapter 13 filing chapter 13 bankruptcy.
According to U.S. Supreme Court, under a decision in 1992 called Dewsnup v. Timm, removal of second mortgage or stripping the lien [also called “strip down.” Or “cram down”] can be done only in a Chapter 13 bankruptcy.
It will be possible when the actual value of your home drops below than the total loan amount or the first mortgage deed of trust, the second mortgage becomes totally secure, & that can be negated through filing a Chapter 13 bankruptcy.
If the value of your home is less than the loan amount, you need to file for approval of the court to remove second mortgage in bankruptcy. The mortgage company might appeal against your filing; in that case there will be an evidential hearing & a adversary complaint. If the court verified that the market value of that particular asset is lower what is owed on the first mortgage, then the 2nd mortgage will be "stripped" & the debt with the 2nd mortgage will become unsecured debt.
to be continued...
