Can you stop paying your second mortgage?
Sure.
Should you stop paying your second mortgage?
Maybe not.
The prevailing theory is that if your home is worth less than what you owe on your 1st mortgage it is highly unlikely that the holder of your 2nd mortgage will bring a foreclosure action against you.
Well, although it may be rare, we did have a homeowner come into our office this year whose 2nd mortgage was being foreclosed although his home’s value was less than the amount owed on the 1st mortgage. Additionally, lenders can, and some will, “sue on the note” (bring an action against you to recover the money you promised to repay them) rather than bring a mortgage foreclosure action.
On the brighter side, we have seen 2nd mortgage payments reduced by as much as 80% a month. Also, some lenders are willing to accept as little as 10% of what is owed on the 2nd mortgage as full payment. Additionally, if bankruptcy is an option, you might be able to “strip off” a totally unsecured second mortgage by filing a chapter 13 bankruptcy (see filing bankruptcy to save home from foreclosure).
We are often asked about paying and not paying second mortgages. Our answer: We can not advise you without knowing your specific situation and considering the particular options available to you. So, make sure you are fully informed before making a final decision.
As always, The Law Firm of VAUGHN & WEBER, PLLC is here to assist you. We are conveniently located in Mineola, NY. You can Contact us at (516) 858-2620 to speak with an attorney.
Exempt Property
What is Exempt Property?
Exempt property is property that is protected by law from the claims of creditors. However, if exempt property has been pledged to secure a debt or is otherwise encumbered by a valid lien or mortgage, the lien or mortgage holder may claim the exempt property by foreclosing upon or otherwise enforcing the creditor’s lien or mortgage. In bankruptcy cases, property may be exempt under either state or federal law. However, NY has opted out of the federal law exemptions. Exempt property typically includes all or a portion of a person’s home equity, motor vehicle equity, household furniture and personal effects.
What Will Happen to My Non-Exempt Property If I File Bankruptcy?
Non exempt property is part of your bankruptcy estate and is subject to sale by the bankruptcy trustee (the debtor is entitled to receive any exempt portion of the sale proceeds). However, even if your property is not fully exempt, you may be able to keep it if you pay its non-exempt value to your creditors in a chapter 13 bankruptcy. Also, you could agree to pay the trustee an amount that would allow you to, in essence, buy back the non-exempt property. The money that you pay to the trustee will be distributed to your creditors. You may also be able to “trade” exempt property for non-exempt property. Essentially, you allow the trustee to take and sale exempt property to avoid losing non-exempt property. There are additional options available. A knowledgeable bankruptcy attorney will be able to assist you with “exemption planning .”
Call (516) 858-2620 to arrange a FREE consultation with a bankruptcy attorney!
Please visit our Bankruptcy category to learn more about filing bankruptcy.
Will I lose my home or car if I file for chapter 7 bankruptcy?
Usually not.
In most cases you will not lose your home or car during your bankruptcy case as long as you can exempt the equity, if any exists, in your home or car. In New York, a person is currently allowed a fifty thousand dollar ($50,000.00) homestead exemption and a twenty-four hundred dollar ($2,400.00) motor vehicle exemption. If the property is exempt it may not be taken by the trustee.
However, bankruptcy does not automatically make a valid lien, mortgage or other security interest go away. Therefore, if you don’t make your payments on that debt, the creditor may be able to take and sell your home or car, during or after the bankruptcy case. Technically, a creditor can repossess your car even if your payments are current. The law requires you to redeem, surrender or reaffirm the vehicle (your bankruptcy attorney should advise you about this issue).
As always, The Long Island Bankruptcy Law Firm of VAUGHN & WEBER, PLLC is here to assist you. We are conveniently located in the heart of Nassau County, Long Island, at 217 Willis Avenue in Mineola, NY 11501. Contact us at (516) 858-2620 to arrange a consultation with a bankruptcy Attorney.
Please visit our Bankruptcy category to learn more about filing bankruptcy.
Remember: The law often changes, and each case is different. The above is meant to give you general information, and not to give you specific legal advice.
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