Negative Home Equity

In this troubled economy, home values have suffered. For many homeowners, between their first and second mortgages, they owe more money on their home than what it is currently worth, or have "negative equity ."

If this is the case for you, and you have a second mortgage or home equity loan, we can explore removing that second mortgage or home equity loan. Under a Chapter 13 Reorganization, if your home is only worth what you owe on your first mortgage, the second mortgage is no longer considered to be a "secured" obligation and can be removed. Through our Chapter 13 program, we will basically convert the second mortgage, home equity loan or other lien to an unsecured debt. This process is called "Lien Stripping " and has many benefits:

This will create a lower payment going towards your monthly mortgage obligations.
Under the terms of the Chapter 13 reorganization we can often eliminate a portion, if not the majority, of your unsecured debts, including the stripped lien. You are simply required to pay your "best efforts" over the course of the program (3 -5 years).
Any money paid toward the "stripped lien" would be paid at 0% interest and oftentimes paid at pennies on the dollar; along with any other unsecured debts you may have (i.e. credit cards, medical bills, personal loans, etc.)
If you are behind on your primary mortgage or a vehicle, and they are being paid through the Chapter 13 Reorganization, all payments to your unsecured creditors (including the stripped lien) are deferred until you are caught up on the mortgage or vehicle.

At the successful completion of the reorganization program, documents are filed with the register of deeds to legally remove the secondary loans or liens from your property and any unpaid balances are eliminated or discharged. Similarly, any unpaid balances on other unsecured debts (credit cards, medical bills, etc.) are eliminated as well.
Besides reducing your mortgage balance and restoring your home value, the Chapter 13 plan has many benefits:

Consolidate and reduce your monthly bills. The plan prioritizes your secured debts (primary mortgage, vehicle, etc.) along with your monthly living expenses first. Only after these obligations have been met, does any unsecured creditor receive money. When we sit down and develop a customized budget with you, we determine how much, if any, discretionary income you have to pay back your other unsecured debts. You are only required to commit that amount as your "best efforts" over the course of the program (3-5 years) and the rest is eliminated or discharged. You no longer have to pay those debts and your credit will be repaired.

Improve your credit. Credit has two main facets: debt-to-income-ratio and timely, consistent payments to your creditors. The reorganization addresses and improves both. Under the Chapter 13 program you no longer pay interest or service fees on unsecured debts. Therefore, each month, as the principal balances decrease, your debt-to-income ratio will improve. Additionally, since the program provides a structured repayment plan, debts are paid back in a timely consistent manner. This creates a smooth payment history and again, works to improve your credit.

Simplify your life. The plan is tailored to your individual situation and budget. From the outset we will perform a detailed accounting of your debts and monthly income. We create a consolidated monthly payment that takes the frustration and guesswork out of bill paying. You no longer need to worry if your bills are being paid on time or if you are forgetting to pay one.

At the end of the program, you are left with a mortgage debt that is in line with your home value, freedom from unsecured debts and improved credit.

We offer free in-office and phone consultations to review your personal circumstances, analyze your situation and advise you on the best course of action. Please call us toll free at 866-261-8282 or click here to schedule a consultation right now.