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Are you allowed to modify a first mortgage by declaring bankruptcy?

According to the recent Bankruptcy Code, the debtors are not allowed to modify first mortgages in bankruptcy. But the new changes in law will be implemented as per the new legislation where the first mortgages will be allowed to modify on the prime property of the filer in bankruptcy.

Can you modify your second mortgage?

Your first mortgage cannot be modified but you are allowed to modify your second and third mortgage. If you declare bankruptcy under chapter 13 bankruptcy then your second and third mortgage liens can be modified.

Is an appraisal required?

You are eligible to modify your first mortgage by declaring bankruptcy if the value of your house drops than the value of the first mortgage. If an appraisal confirms the information then your second mortgage will not be secured so you can modify your mortgage by declaring bankruptcy.

Chapter 13 Bankruptcy

You can file a petition with the bankruptcy court under chapter 13 plan. Once you file the petition it will include your second and third mortgages for modification through bankruptcy. Make sure that you have an evidence of the appraisal showing that the value of the mortgage is below the value of the first mortgage. But you can modify your mortgage by bankruptcy if there is a good appraisal.

Can you remove second mortgage lien?

The lien on the second mortgage will be removed after the completion of the entire process. Under chapter 13 bankruptcy the second mortgage will be paid as an unsecured debt. In order to get a permanent modification you have to complete chapter 13 repayment plan. In case you fail to complete the repayment plan then it might be difficult to remove the second lien.

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