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How A Second Mortgage is Affected by Bankruptcy

Serving Families Throughout Fort Walton Beach

If a second mortgage on your principal residence, aka Florida homestead, in Okaloosa, Walton, or Santa Rosa County, Florida, is completely unsecured (meaning if the amount of your first mortgage is greater than the value of your home), then you may be able to strip or remove the 2nd mortgage debt and lien from your home through a Chapter 13 Bankruptcy.

If it can be proven to the Court that the value of the home is less than the amount owed on the first mortgage, then the second mortgage is completely unsecured and you may be able to convert it to an unsecured loan (the same as a credit card) and ultimately with the Court's approval obtain a discharge of the 2nd mortgage upon completion of the Chapter 13 Plan (which takes 36 months or 60 months depending on your gross income at the time the Chapter 13 is filed). However, this does not happen automatically, a motion is required to be prepared and filed with the bankruptcy court and a hearing held on the motion to determine if you can get rid of the second mortgage loan upon completion of all payments and requirements under an approved chapter 13 plan.

There is also a brand-new mediation process in Chapter 13 cases. Check back as this new mediation program was only recently announced and I will be writing more on that program in the coming months.

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