As a way to handle debt, many homeowner’s take out a second mortgage or an equity line to consolidate debt. Some people need to use the equity in their home to pay for emergency home repairs, medical bills or other expenses that they were not expecting. Regardless of the reason, using the equity in your home can have both advantages and disadvantages.
A second mortgage allows you to pay bills that you may not otherwise be able to pay or to consolidate bills into a more manageable monthly payment; however, if you are unable to pay the second mortgage, you could lose your home through foreclosure. If you are facing a foreclosure, you may be able to remove a second mortgage in bankruptcy if you meet certain qualifications.
Requirements to Remove a Second Mortgage
If you are struggling to pay your bills, bankruptcy can help you. You probably never imagined that you would be in a position where you would be considering bankruptcy; however, you simply cannot afford to pay all of your bills and your living expenses on your current income. Bankruptcy is designed to give you a fresh start so that you can recover from a financial crisis and rebuild for a stronger financial well-being. In some cases, that may include filing a motion to remove a second mortgage.
In order to remove a second mortgage through bankruptcy, you must file a Chapter 13 case. You cannot remove a second mortgage by filing a Chapter 7 bankruptcy. When you file your Chapter 13 plan, you include a motion that values the second mortgage at zero. If the more is approved by the court, the second mortgage will become an unsecured debt and included with the rest of your unsecured debt in the bankruptcy plan. Once you have paid all of your bankruptcy payments and you receive your bankruptcy discharge, the lien of the second mortgage will be released as to your home.
However, in order to remove a second mortgage, the payoff of your first mortgage must exceed the current value of your home. If the payoff of your first mortgage is even one cent under the value of your home, you will not be able to remove the second mortgage. In order to determine the value of your home, you may be required to obtain a current written appraisal of your home from a qualified real estate appraisal.
If you believe you qualify to remove a second mortgage in bankruptcy, contact our office to schedule a free bankruptcy consultation. We will discuss all of your options including filing a bankruptcy to remove a second mortgage.
Contact Our Office for a Consultation with an Experienced Illinois Bankruptcy Attorney
The attorneys of Pioletti Pioletti & Nichols represent individuals who need experienced bankruptcy attorneys. We serve clients throughout McLean, Woodford, Tazewell and Peoria counties by providing compassionate, competent legal services. Contact our office at 309-938-4838 to schedule a free consultation.
When you need the assistance of an experienced bankruptcy attorney in Central Illinois, call the attorneys of Pioletti Pioletti & Nichols. Our attorneys want to help you find an affordable solution to your debt problems. We are dedicated to giving our clients exceptional service and support throughout the bankruptcy process.