QUESTION
Can a reorganization, not a bankruptcy, allow a homeowner to somehow relieve the debt of a heloc or second Morgage when the home is now underwater.
Asked on Jun 19th, 2012 on Bankruptcy - Alabama
More details to this question:
The home is currently worth far less than what the amount still owed on the first mortgage. The home was purchased in 2007 for 525,000 and is now apprised at approx 275,000 therefore the second Mortgage or heloc has become an unsecured loan because the collateral original worth of the home is now gone. If I continue to just pay the first Morgage payment to BOA and not the second which is also held by Boa, they can foreclose, BUT would they. I live in Florida which is a homestead state, so would the judge side with me or BOA in a court proceeding? That is where the reorganization not a banruptcy question comes in. I could still afford to continue to pay the first Morgage but not both? I would like to keep my house!
1 ANSWER
Bankruptcy Attorney serving Burbank, CA
Partner at
Law Office of Mark J. Markus
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3 Awards
You can eliminate junior liens on real property such as you described above in either a Chapter 13 or Chapter 11 case. The amount owed would be treated as an unsecured claim and paid whatever percentage that class of creditors is receiving under your plan. How much that is depends on multiple factors, including your income, expenses, amount of priority claims to be paid, etc.
Mark J. Markus, Attorney at LawCertified Bankruptcy Law Specialist--State Bar of CaliforniaHandling exclusively bankruptcy law cases in California since 1991.http://www.bklaw.com/bankruptcy blog: http://www.bklaw.com/bankruptcy-blog/Follow Me on Twitter: @bklawr
Answered on Jun 20th, 2012 at 3:41 PM