Stripping Second Mortgages in Jacksonville Bankruptcy
I have previously written about modification of Mortgages through Chapter 13 in Jacksonville, FL bankruptcy:
https://www.planlaw.com/modification-of-mortgages-in-chapter-13-in-jacksonville-fl/
But some people are not interested in modifying their first mortgage or may have already received a modification and would not be eligible for a further reduction in payments. In such a case, many people seek relief under Chapter 7 of the Bankruptcy Code. Chapter 7 is the basic liquidation Chapter which will relieve people from unsecured debts such as credit cards, medical bills, etc.
So what does Chapter 7 have to do with mortgage stripping? As of mid-2012, the Bankruptcy Courts in Florida, Georgia and Alabama have been able to strip second mortgages in Chapter 7 if the value of the home is less than the amount owed on the first mortgage. In McNeal v. GMAC Mortgage LLC (In re McNeal), 2012 WL 1649853 (11th Cir. May 11, 2012), the Eleventh Circuit determined that lien-stripping of a wholly unsecured lien or second mortgage is allowed in chapter 7. GMAC Mortgage, currently in chapter 11 itself, has requested a rehearing, but the review of ruling has been held up by the GMAC Chapter 11 filing.
In order to qualify for this relief, you must file Chapter 7, have a home with a first and second mortgage (even homestead property is eligible) and the value of the home must be below the payoff of the first mortgage. Often, a tax value is appropriate to use to determine your home’s value or an appraisal may be ordered to determine valuation.
Whichever method you use to determine the valuation of the home, time is limited. The ruling is subject to reversal at any time due the pending rehearing motion. If your motion to strip has not been granted (and any applicable appeal/rehearing time has run) when the ruling is overturned, you will lose the ability to strip the second mortgage from your home. In such a case, a Chapter 13 may be the only avenue to obtain relief from the second mortgage.
If you feel that you may benefit from a loan modification or any type of mortgage relief, contact our office at 904.725.0822 for a free consultation.
Bryan Mickler
