Removing a Second Mortgage
Chapter 13 Bankruptcy also offers an important, and often unknown, option to consumers who have a residential real estate mortgage, namely, removing a junior lien holder or "2nd" mortgage from your home.
If you purchased a home with 80/20 mortgages or if you took out a second mortgage in the past few years, you may be able to remove the second mortgage. If the fair market value of your home is below what is owed on the first mortgage, the second mortgage can be removed and the debt associated with it becomes unsecured debt (treated like your credit card debt). In a Chapter 13 Bankruptcy, usually only a small, if any, portion of this type of debt is paid.
We will need to obtain an appraisal and comps to establish your home's fair market value. We will also need to obtain approval of the court. The mortgage company may oppose this motion. If they do, there may be further court proceedings. At this time, the mortgage companies are not typically opposing our motions to remove the second mortgages.
You will need to make all plan payments to obtain your discharge. Once you have the discharge, the second mortgage is gone.