Most of the clients I speak with our concerned about keeping their home. Some have tried to negotiate with banks to modify their mortgages. Our loan modification division has helped numerous people stay in their home, even after receiving a notice of default. Others turn to bankruptcy to help them reorganize their financial lives. Many of the clients considering bankruptcy ask if there is a way to simply eliminate the second mortgage on their home. While Chapter 7 is a great way to eliminate qualified unsecured debt, it will not change or eliminate secured debt such as debt secured by a home or car. In some cases, a lender may be willing to negotiate with a debtor in Chapter 7 to modify a home mortgage or car loan. However, these lenders are not required to modify the terms of the loan under Chapter 7 bankruptcy and success under Chapter 7 is inconsistent. However, Chapter 13 may provide a solution.
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Eliminating a Second Mortgage under Chapter 13 BankruptcyChapter 7 Bankruptcy Exemptions – HomesteadClients often ask whether they can keep any of their property when filing bankruptcy under Chapter 7. In California, a debtor can choose between two different exemption systems to choose what situation fits them best. The analysis usually begins and ends with the debtor’s home. If the debtor has significant equity in the home prior to filing bankruptcy, they will likely want to claim the larger exemptions under Section 704.730. This sections provides an exemption of $50,000 for a single debtor, $75,000 for heads of household, and $150,000 for disabled individuals or individuals over the age of 65. The Difference Between Chapter 7 and Chapter 13 BankruptcyMost consumers know bankruptcy can eliminate some types of debt, but they are unsure which type of bankruptcy to consider. There are two types of consumer bankruptcy. Chapter 7 bankruptcy is a type of personal bankruptcy and can be referred to as straight bankruptcy. Chapter 13 bankruptcy is another form of personal bankruptcy and is often referred to as reorganization bankruptcy. While the purpose of both Chapter 7 and Chapter 13 is to help the debtor get back on their feet, each form of bankruptcy accomplishes this in very different ways. |