Filing a Chapter 13 bankruptcy versus filing a Chapter 7 bankruptcy has its advantages. The primary advantage is that you can use a Chapter 13 bankruptcy to save your homestead. The Chapter 13 bankruptcy provides for a three (3) to five (5) year structured payment plan in order for an individual to save their homestead.
An individual can stop the foreclosure proceeding on their home by filing a Chapter 13 bankruptcy. Once filed, the individual is afforded an opportunity to begin making the regular monthly mortgage payment, while additionally catching up on the delinquent mortgage payments over a period of time.
The Chapter 13 bankruptcy procedures also allow you to “strip” mortgages and obtain loan modifications.
Every day at Tudhope Law, our Orlando bankruptcy lawyers work with clients to successfully stop foreclosure and save their homes.
Discharge Second Mortgages, Third Mortgages, and Home Equity Lines of Credit
Many individuals who file Chapter 13 Bankruptcy can also discharge their second mortgages, third mortgages, and home equity lines of credit (HELOCs), which are attached to their homestead. Removing these liens, and discharging these mortgages is limited only to Chapter 13 Bankruptcies, and is not available in Chapter 7 Bankruptcies.
Whether these loans can be removed from a homestead, and discharged, depends on the market value of the homestead property, and the balance owed on each loan.
If the market value of a homestead is less than the balance owed on the first mortgage, then any second mortgages, third mortgages, or HELOCs would be determined to be unsecured and discharged in the Chapter 13 bankruptcy.
For example, let’s say your homestead is worth $100,000.00. You have a first mortgage in the amount of $150,000.00, and a HELOC in the amount of $50,000.00, totaling $200,000.00 owed on your homestead. Your home is worth $100,000.00, which equals less than the balance owed on the first mortgage. In that case, the HELOC would be determined to be unsecured. The lien would be removed from the title of your home, and you would walk away at the end of the Chapter 13 bankruptcy, only owing your first mortgage on your home.
Under Chapter 13 Bankruptcy, the Orlando bankruptcy attorneys at Tudhope Law, have helped hundreds of people in Central Florida save their homes by stopping foreclosure, and discharging second mortgages, third mortgages, and home equity lines of credit.