Did you know that in many jurisdictions one can use Chapter 13 to get rid of a second lien on one’s principal residence?  Nowadays, given that the market value of real property has been tanking many people are finding themselves upside down on their home.  What does that mean?  It means they owe far more on their mortgage or mortgages then the property is worth these days.  We bankruptcy lawyers were all hoping and praying that Congress would pass Senator Dick Durbin’s proposed legislation that would allow us to ‘cram down’ mortgages to the amount of the current market value, but unfortunately, only 45 Senators had the courage to stand up to the Banks, (yes those same Banks who have no problem accepting Welfare!) and the law did not pass.

That law would have saved thousands and thousands of homes throughout the nation, and entire neighborhoods!  But we still have a few tricks up our sleaves.  In many jurisdictions we can still use Chapter 13 type bankruptcy to strip a second lien on real property provided the current market value of the property has dropped low enough.  If there is any equity to cover the second mortgage it is unlikely that you can do it, but many of my clients have real estate that has dropped over 25% in value during this current economic crisis and the time is ripe to determine if they can get rid of those second mortgages taken out when values of real property were peaking.  So take some time to get a free market analysis of your home to get a ballpark figure of the current market value of your home.  If it comes in low enough, near what you owe on the first mortgage, I suggest you contact a local bankruptcy attorney to determine if you should file a Chapter 13 just to get rid of that second mortgage.

You will likely have to pay for a formal appraisal, in the neighborhood of $300 – $500 but if the value has dropped enough, you can indeed rid yourself of that second mortgage forever and ever.  Of course, you must successfully complete the Chapter 13 payment plan in order to get rid of it permanently.  This is not something you should attempt without consulting with an experienced Chapter 13 lawyer, preferably a member of the National Association of Consumer Bankruptcy Attorneys, NACBA.  You can usually rely on lawyers who are members of this organization to provide sound legal advice.