Usually you cannot strip junior liens, second mortgages, or HELOCs in Chapter 7 bankruptcy. If you satisfy certain requirements, you can eliminate a second mortgage, home equity loan, home equity line of credit (HELOC), or other junior lien from your house in bankruptcy through a process called lien stripping.

What happens to my mortgage after Chapter 7 discharge?

Although Chapter 7 bankruptcy gets rid of your personal liability on your mortgage, the lender can still foreclose if you stop paying. Filing for Chapter 7 bankruptcy will wipe out your mortgage loan, but you’ll have to give up the home. So, if you want to keep the house, you must continue paying your mortgage payment.

Is mortgage discharged in Chapter 7?

Chapter 7 bankruptcy eliminates your personal responsibility on the mortgage loan. As a practical matter, this means bankruptcy can eliminate any potential for the lender to collect a deficiency judgment against you. The lender’s only recourse after the bankruptcy is to foreclose on the property.

Can a second mortgage be discharged?

The second mortgage (or other junior lien) you strip is treated as a nonpriority unsecured debt when you file your bankruptcy. However, the second mortgage lien will not be removed from your house until you complete your plan and get a discharge.

How can I get rid of my second mortgage after Chapter 7?

If you file for Chapter 7 bankruptcy, you cannot get rid of second mortgages, home equity lines of credit (HELOCs), or home equity loans. Filers in the Eleventh Circuit Court of Appeals, are no longer able to strip off (remove) these types of liens in Chapter 7 bankruptcy.

Can a second mortgage be removed in Chapter 7 bankruptcy?

In most cases, you can only get rid of your second mortgage or other junior lien if you file for Chapter 13 bankruptcy. But recent appellate court decisions in the 11 th Circuit may allow lien stripping in Chapter 7 bankruptcy in a handful of states including Alabama, Florida, and Georgia.

What happens when you file for Chapter 7 mortgage?

Chapter 7 Wipes Out Mortgage Debt, Not Mortgage Liens. A mortgage loan is a secured debt. When you entered the loan contract, the lender created a lien on the property by taking the home as collateral to secure payment of the loan. If you don’t pay your mortgage, the lender can enforce its lien by foreclosing on the house.

Can a Chapter 7 mortgage remove a junior lien?

Chapter 7 Won’t Strip a Junior Mortgage Lien. Lien stripping is the process of removing junior liens (such as second or third mortgages) from your house if the balance of your first mortgage (or other senior liens) exceeds the value of the property.

Can a secured mortgage be discharged in bankruptcy?

Bankruptcy can buy you time to avoid a foreclosure, but it won’t prevent foreclosure forever. Secured debt (i.e., a mortgage loan) has two legal components. The first component is personal liability for the amount borrowed. The other is the security interest, or lien, the lender takes in your home.