Sunday, May 29, 2011

SF Bay Area second mortgage

Many San Francisco Bay Area homeowners found themselves in their personal financial crises after taking out a second mortgage for properly only to have the bottom fall out under them in a few years. The home is not necessarily lost and bankruptcy might be the way to eliminate that second mortgage according to Bankrupt Bay Area homeowners shed second mortgages in San Jose Mercury News

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 unsecured debt when there is no equity to cover them, as is the case for millions of houses that are now worth far less than a few years ago.

When that happens in a personal bankruptcy proceeding, the second mortgage is put on hold and no payments are required while the homeowner completes a repayment plan for other debts - which typically takes three to five years. At that point, the second mortgage is eliminated.

Keep in mind it is not as simple as it sounds. The homeowner may shed the debt but the second lien is still held on the property and lender would ask for money to release the lien. If Bay Area real estate market turns around soon and a homeowner who filed bankruptcy and eliminated the debt goes to selling the house guess who will get the money first.

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