We know that many homeowners and investors want to save their real estate holdings, so they can sell them later when their value rises. Though the Great Recession is over, the impact on residential property values can still be felt. You may not be in a position to sell your real estate in this market but you may also be faced with unmanageable debt related to residential property.
Before you default on your loans, enter into foreclosure proceedings or fall victim to a short sale, we can help you address important pre-planning issues:
- Identify where lien stripping can help save a property
- Organize your real estate portfolio to offer the best chance to retain any or all of your holdings
- Avoid debt relief and refinance scams that will not alleviate your challenges
- Explore all options for protecting your assets and long-term financial health
If lien stripping is possible, we can determine which property should be deemed your primary residence. We can then help you eliminate any mortgage that is not the first mortgage, which is wholly unsecured and is in excess of the property’s actual current market value. This means what you owe on your house can be reduced down to only the current value of the property.
Your first mortgage will be for this amount and is secured because the home is collateral for that amount. The remaining amount of the other loans can be stripped and then become unsecured debt. This can be paid off for pennies on the dollar through a bankruptcy petition such as Chapter 11 or Chapter 13 where debts are reorganized and a payment plan is set up.
With real estate declining as much as it has, most second and other mortgages we see beyond the first are wholly unsecured. In fact, in many cases, we are finding that even the first deed of trust/mortgage on the property is greater than the value of the house.
For example: If you home worth first mortgage of $500,000 and a second mortgage of $100,000 and the current value of your home is $400,000 you can remove the second lien wholly because it is considered an unsecured debt in a Chapter 13 Bankruptcy Case. Since the second mortgage of $100,000 is not secured by the value of the real estate anymore, they are considered “wholly undersecured.” The $100,000 second was “stripped” from the property and is treated as an unsecured creditor in the case and is no different than a credit card.
So while many people are starting to surrender their real estate back to the bank, think twice before you make your decision and speak with a competent bankrutpcy attorney. You just might be able to remove the second mortgage and keep the house with a more affordable mortgage payment!