Written by attorney Michael A. Koplen

How to Eliminate a Mortgage Using chapter 13 Bankruptcy

Bankruptcy is a powerful tool and can be used to completely eliminate mortgages. How is this done? In a nutshell, here is one way that a skilled bankruptcy lawyer can completely eliminate your second mortgage, or home equity loan. The following is very relevant in 2011 as real estate prices continue to decline. It applies to debtors who have at least two mortgages, or a mortgage and home equity loan or other type of lien on their home.

  1. File a chapter 13 bankruptcy. You will need chapter 13 as the following is not possible wiht a chapter 7.

  2. Obtain an appraisal showing that your home is worth less than the amount you owe on the first mortgage. This is critical, but if you qualify you have a wonderful opportunity to eliiminate the Home equity loan or second mortgage.

  3. If your home's value is equal to or less than the amount you owe on your first mortgage, ask your lawyer to file a "Pond motion" with the bankruptcy court. The Pond motion is named after the leading case on the subject. If your lawyer does the job correctly, the bankrutpcy court will grant the Pond motion and make an order stripping the second mortgage off your home. AT the Koplen Law Firm, we have successfully stripped many second mortgages off homes, leaving home owners in much better financial condition.

Here is a simple example of how it works.

Let's say your house is valued at $500,000.

You have a first mortgage of $501,000 and a second mortgage or equity line of $100,000.

File chapter 13. Have your skilled bankrutpcy attorney file a "Pond Motion" with the Court.

The court will grant the motion, and order the home equity line stripped off the house altogether. The lien is removed and the debt is treated like a credit card debt which in many cases means it is completely discharged.

This is very powerful and is available to Chapter 13 filers only. If you have any questions about a Pond motion or any other matter related to bankruptcy or real estate, please give the Koplen Law Firm a call at 845-623-7070 for a free consultation.

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