Chapter 13 can provide a glimmer of hope to homeowners struggling to make 2nd mortgage payments. Getting rid of a second mortgage mortgage in a chapter 13 bankruptcy has become routine in many jurisdictions like New Hampshire and Massachusetts. As a bankruptcy lawyer who has filed a couple of dozen of chapter 13s to strip second mortgages in the past few years, I have yet to have a bank oppose a strip motion. If you can prove your home is worth less than the balance of your first mortgage, you are eligible.
A recent New Hampshire Bankruptcy court decision extended this right to people who filed a chapter 7 bankruptcy in the past 4 years. Not eligible for a discharge for 4 years, the court ruled former chapter 7 debtors may still strip a 2nd mortgage from their home in a chapter 13 as long as they never reaffirmed that mortgage. This is great news for homeowners struggling to make their mortgage payments. I cannot tell you how often I get calls from someone waiting to hear on a loan modification who has gotten a foreclosure notice. It is disingenuous of a bank to pretend to work with you and foreclose at the same time, but it happens all the time. Know your rights before it’s too late. With the real estate market rebounding, the window of opportunity is closing.