If you own real estate with a second or other subsequent mortgage after your first, chances are you can remove that lien in a Chapter 13 Bankruptcy. This is most common these days as a result of the declining real estate market.
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 competant bankrutpcy attorney. You just might be able to remove the second mortgage and keep the house with a more affordable mortgage payment!