Second Mortgages and Chapter 7 Bankruptcy
Ferguson & Ferguson
Attorneys at Law
June 3rd, 2015
Chapter 7 bankruptcy involves liquidation and distribution of your assets to your creditors, those to whom you owe money. People have a basic misunderstanding however, of the benefits of how filing for Chapter 7 bankruptcy can benefit them when they are unable to make payments on the full amount of their monthly mortgage. What chapter 7 bankruptcy can do is to stop foreclosure proceeding on your home and give you the opportunity to catch up on missed payments and restructure your mortgage to allow more affordable payments going forward. It does not however eliminate your mortgage. In a Chapter 7 bankruptcy, unsecured debts are fully discharged, leaving you with no further obligations to make payments. Examples of unsecured debts are credit card loans, medical bills, signature loans, and until just the other day, second mortgages. The Supreme Court has change the way Chapter 7 bankruptcy effects the second mortgage on your property.
In a nutshell, the Supreme Court has reversed the judgement handed down from the Court of Appeals and stated that second mortgages can no longer be treated as an unsecured debt and automatically discharged in Chapter 7 Bankruptcy. Given the real estate boom from 200-2007, this will have a dramatic effect on who can and can’t save their home by filing for bankruptcy.
With real estate prices increasing rapidly in the earlier part of the 2000’s, 2001-2006, many homeowners were enticed to access their new home equity by taking out second mortgages. This increased the amount of their total mortgage debt sometimes to an amount equal to up to 90% of their home’s market value. When the real estate market crashed in 2007, homeowners found themselves unable to make payments on their mortgages and many opted for bankruptcy protection. Until the change the other day, the second, or third mortgages you took out on your home could be discharged as unsecured debts, leaving you owing only your first mortgage. Second and subsequent mortgages will now be considered secured debt and not dischargeable in bankruptcy.
These changes leave those who are struggling with monthly debts even more in need of an experienced and creative bankruptcy attorney than ever before.
Jackie Ferguson Graham has been a bankruptcy attorney since 1990. She is one of the leading Alabama bankruptcy lawyers in Huntsville and Decatur. She has been providing quality legal services for consumers and small businesses at affordable prices throughout North Alabama, and all of Cullman, Morgan, Limestone, Lawrence, Jackson and Madison Counties since 1990.
Ferguson & Ferguson’s experienced Huntsville bankruptcy attorneys will help protect clients’ rights and property. Our Huntsville bankruptcy lawyers can keep creditors at bay and help clients keep their home, vehicles and other property. Our bankruptcy attorneys are committed to providing clients with immediate debt relief and with assistance in starting over. Our Huntsville bankruptcy lawyers keep abreast of ever-changing federal bankruptcy laws and provide our clients with the best, most current advice.