When a junior mortgage may be removed
If the value of your home is less than the balance owed on the first mortgage, a second or third mortgage may be wholly unsecured. In a Chapter 13 case, a wholly unsecured junior mortgage may be treated as an unsecured debt and removed from the property upon completion of the plan.
Whether this applies turns on the value of the home and the balance of the senior mortgage, which means a careful valuation is central to the analysis.
What it does not do
This does not eliminate the first mortgage, and it is not available simply because a home has lost value. It also generally requires completing a Chapter 13 plan — it is not something a Chapter 7 case accomplishes.
Mortgage arrears
Separately, the automatic stay prohibits a creditor from foreclosing while a bankruptcy case is pending, and Chapter 13 plans commonly address missed mortgage payments over the life of the plan.
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