Foreclosures and Alternatives

With the federal lien stripping program, individuals have the opportunity to reorganize debt under Title 11 of the United States Code.

The mortgage removal program is also a possibility, however, it is only an option in the context of a reorganization. This is often times known as Chapter 13.

Do you own a home with more than one mortgage? If so, it may be possible to remove, avoid, or strip junior mortgages from your property and county records. Subsequently, the only thing remaining is your first mortgage. For those who qualify, all mortgages in addition to the first will no longer be secured by your home. Furthermore, you are never required to make payments on those loans again.

The creditor is unable to take action, as long as you meet these requirements:

  • The first mortgage is equal to or greater than the fair market value of the property.
  • You have regular income.
  • The total of your unsecured debt is $360,525 or less, and your secured debt does not exceed $1,081,500.

The Ninth Circuit Court of Appeals has been ruling in favor of homeowners since 2002, stating that mortgages on homes can be removed as long as all qualifications are met. With today’s real estate market still struggling to recover, this means that many people are able to remove junior liens on properties refinanced or purchased since 2004.

Here is an example: you have a first mortgage of $400,00 and a second mortgage of $150,000. Your home is worth $390,000. With this program, the $150,000 is wiped clean and you are only required to make payments on the first mortgage. Even if the market takes a turn for the better, the lien cannot be reinstated.

For additional information, guidance, or advice, contact one of our San Diego bankruptcy attorneys.

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