Depending on your personal financial situation, you may be eligible to file Chapter 7 bankruptcy. Filing for Chapter 7 bankruptcy could be hazardous if the second mortgage holder exercises the option to foreclose. In the vast majority of instances, this would not occur because the lender would be responsible for paying the first trust deed and would wind up with a property on which they owe more than it is worth. In this situation, Chapter 7 bankruptcy has a high chance of succeeding, but there is a risk involved.
If the debtor has sufficient disposable income to file for Chapter 13 bankruptcy, this is another option. Chapter 13 bankruptcy requires the debtor to negotiate with creditors a three- to five-year court-approved payment plan. The primary advantage of Chapter 13 is that the debtor rarely loses property unless they voluntarily give it up. Numerous individuals utilize Chapter 13 when they want to retain their home and catch up on their debt. When a debtor has a second on their home but no equity to support it, they can eliminate the lien and treat the debt as unsecured. In order to use lien stripping, most courts require the debtor to fulfill the Chapter 13 payment plan.
When evaluating the differences between Chapter 7 and Chapter 13 bankruptcy, it is essential to consult a bankruptcy attorney with experience in this area of law. You have a tremendous advantage because bankruptcy attorneys know the trustees and are familiar with the District court in which you are petitioning. Recently, as a result of the housing collapse, some bankruptcy attorneys have become extremely inventive in their use of the law to benefit their clients. Some attorneys will file Chapter 7 to discharge unsecured debt, followed by Chapter 13 to negotiate the property with the lender.
When declaring bankruptcy, it is often advantageous to attempt to keep your home and avoid foreclosure, as it may be less expensive than renting something comparable. If the debtor is still employed, there is a high chance they would be able to afford the payment if their credit card debt and second mortgage were eliminated. In many cases, removing these two items from their monthly expenditures will suffice. Consultation with a local bankruptcy counsel is the first step towards achieving financial independence. Spend an hour to determine if there is any value for your family.""
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