Hi, I’m Mike Greiner, I’m an attorney with the Financial Law Group located here in Warren and I’m here today to talk to you about chapter 13 bankruptcy and how we’ve been able to take the second mortgage lean on people’s homes through chapter13 bankruptcy. You can contact us by the way at 586-693-2000 and our website is financiallawgroup.com. Now coming back to chapter 13 bankruptcy, something a lot of people have thought coming into my office is that they can get rid of a second mortgage through chapter 7 bankruptcy.

Mortgages actually include two elements. There is the note which is the personal liability that, that you have for the mortgage and there is the mortgage which is actually the lien that the mortgage company has on your home. The lien is the right, the property rights that the mortgage company has so that they can take back your home if you do not make your mortgage payments. The the note is just the personal liability you have. Just like a credit card. You have a note with a credit card and it’s that personal liability you have to pay that debt. The Chapter 7 bankruptcy does actually wipe out the personal liability.

So the mortgage company, although it used to not happen very often. It happened more and more frequently recently could sue you under the note, just like a credit card can to collect on that debt. They also, as a result of the mortgage, have foreclosure rights against your property.  By filing Chapter 7 bankruptcy you get rid of the rights that the mortgage company has to sue you personally. They still have the rights to foreclose though. Those rights, in this day and age with the property values have declined, might be worthless because the fact that your home might be worth less than what you owe on the first mortgage, or what you owe on property taxes. If that’s the case, then once the foreclosure happens the second mortgage would get nothing. So there’s no reason for the second mortgage to foreclose. So I’ve had a lot of clients who’ve come in they’ve just filed chapter 7 bankruptcy. They’ve gotten rid of their personal liability for the second mortgage. They might not be planning on staying in the house for very long or at some point moving out, or might not know. But the bottom line is that they’re in a situation they just want to get rid of the personal liability and they don’t really care if there’s that lien sitting out there that could potentially foreclose on their house someday if the value of the first mortgage goes down base on the payments that you make. And the value of the property goes up, based upon the property value starting to bounce back. So if you’re in situation chapter 7 bankruptcy can certainly be helpful to you.

If not however then the other option is we can actually file a chapter 13 case. Now chapter 13 scares a lot of people because that’s the chapter where you pay certain payments that could go toward your creditors. A lot of my clients though actually pay nothing or very little toward their unsecured creditors, unsecured creditors would include things like credit cards and medical bills. The secured creditors would include things like your mortgages and car loans, those debts have to be paid unless you want to surrender the property.

So if you have a car loan that you want to that, that, that where you wanna keep the vehicle. You need to keep making those payments.  That payment could potentially be included in chapter 13 bankruptcy. And there are certain circumstances where it can actually reduce the amount you owe on the car based upon chapter 13 bankruptcy. Although those opportunities have really been narrowed when law was changed a few years ago. Your first mortgage, either you’ll have to stay current on, or if you’re behind on it, we can get you caught up on that mortgage through chapter 13 bankruptcy. We can’t actually change the payment, on the first mortgage, but we can get you caught up on it, with no interest, over a period of time. Which often times is a better deal than you can get anywhere else. But the second mortgage, that’s the key if the property values of your home have declined, to the point where you owe more on the first mortgage then your home is worth, then there is no equity there.

In the house for a second mortgage, if that’s the case then through chapter 13 if you make all your payments on chapter 13 case, even if you pay nothing toward the second mortgage, then that second mortgage can be wiped off your home and you will never owe that second mortgage again. A lot of our clients have found that to be very helpful, and especially with the way that the mortgage companies really don’t work with people to do mortgage modifications. A lot of people have found that this is really the most effective mortgage modification out there. We have a unique opportunity now where so many people have second mortgages because of the way the mortgage industry was a few years before the crash.

Property values have declined so much because of the economic crisis we’re in. Although it’s a crisis it’s difficult for a lot of people. It’s also an opportunity. And the opportunity is that you can get rid of a second mortgage which you might not have been able to pay off for many years or ever.  But you can get rid of it often with a very low payment through chapter 13 bankruptcy. If you want to find out if this will work for you give my office a call. I have free consultations. Number’s 586-693-2000 and our website is financiallawgroup.com. I’d be happy to discuss your options on this.