Yes, it is possible to get rid of a second mortgage if you file a St. Louis Chapter 13 bankruptcy. Such a filing allows for the possibility of stripping off any junior liens on a piece of real estate. And so long as you complete the Chapter 13 plan, the only thing you’ll have left at the end of the bankruptcy will be your first mortgage.
Here’s how it works: Let’s say you have a house with a first and second mortgage. You owe $100,000 on the first mortgage, and $25,000 on the second mortgage. But the fair market value of your home is only $75,000. In this scenario, it would be possible to strip out the second mortgage because no equity exists in the first mortgage (i.e. the first mortgage is underwater by about $25,000).
If you think about it, it makes sense. If you were to sell this house at $75,000, obviously all of that money would go to the holder of the first mortgage (because they are literally first in line, and are the senior lien holder). The junior lien holder (the second mortgage) would get nothing. From the court’s point of view, if there is nothing supporting the second mortgage, then it should be stripped out.
The catch (of course, there’s always a catch) is that you have to complete the entire Missouri Chapter 13 plan, and make every monthly payment. Most Chapter 13 plan last from three to five years. However, you would not have to continue to pay the monthly note on the second mortgage during those three to five years. Once you receive an official discharge from the court at the end of the plan, the second mortgage will be knocked out for good. In addition, you will be able to pay off other debts as well, such as car loans, tax debts, and even any delinquency you might owe on the first mortgage.
The St. Louis bankruptcy attorneys at Brinkman & Alter, LLC have been stripping unwanted loans off of real estate for years. Our goal is to put you in the best situation possible, and set you on a path towards financial recovery. All phone conversations and office consultations are free of charge.