Did you know that some homeowners who have been hurt by the housing crash are taking advantage of a little-known loophole in the bankruptcy law to get rid of their second mortgage and also avoid the pain of foreclosure. Statistics are hard to come by, but from what I hear in bankruptcy law circles the provision has been used effectively in possibly thousands of cases during the past two years. Many of these second mortgages were granted during the housing bubble, when home prices were going in one direction only - up, up and up.
Bankruptcy laws prevent homeowners from eliminating the debt of a first mortgage if they plan to stay in their home. But second mortgages are treated differently. They can be declared as unsecured debt when there is no equity to cover them, as is the case for millions of underwater homes that are now worth far less than a few years ago.
Bankers hate it, but for a homeowner who bought a property during the boom, it might be the only way for them to get out from under crushing debt. This is a really big-ticket issue that allows people to keep a home and conform the mortgage to something closer to real value. The law has been like this for years. It's just never been used as much because in the past there was usually enough equity in a home to cover the second mortgage.
If you feel that you are being crushed under a mountain of debt but aren't sure what your options are I offer a free 30 minute telephone bankruptcy consultation where we can discuss your debt situation and you can get your questions answered. So what are you waiting for?