You Avoid Foreclosure When Your Bankruptcy Lawyer Erases Your Second Mortgage in a Chapter 13 Bankruptcy

Richard Fonfrias, J.D.
Chicago's Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC

When you borrowed money to buy your home, you likely took out a first mortgage, which was secured by your residence. Later, you opened a home equity line of credit, which gives you access up to a fixed amount of money that's available when you need it. This home equity loan was also secured by your residence.

But when your home went down in value, which many did when the housing bubble burst, your home was not worth enough to secure both the first and second mortgage. As a result, the home equity loan (your second mortgage) - which was lower in priority than the first mortgage - became an unsecured loan due to market conditions.

If you file a Chapter 7 bankruptcy, you erase your obligation to pay the second mortgage; however, the second mortgage remains on the property.

But not so in a Chapter 13 bankruptcy. In this case, your bankruptcy attorney can initiate a process called lien stripping. This is a legal action that results in the Court declaring that your second mortgage is no longer a secured loan. Plus the Court also removes, i.e. strips, the second mortgage from your property.

So ... if you fall behind in your second mortgage payments, your bankruptcy lawyer might advise you to stop making those payments. Your lawyer then goes to Court and has the loan removed from your property. As a result, it becomes impossible for the lender that financed your second mortgage to foreclose on your residence because the lender's second mortgage no longer exists.

Good News: Even if your home later increases in value so your previous second mortgage could once again be secured, you're off the hook. After all, the Court removed the second loan from your property and a future increase in your home's value is to your benefit and not the lender's.

As you can see, there are fine distinctions between Chapter 7 and Chapter 13 bankruptcy. This is why I suggest that you not take any action until you first speak with a qualified bankruptcy lawyer. If you do the wrong thing, you could easily find yourself in foreclosure when, in fact, you might be able to avoid a foreclosure altogether. Richard Fonfrias of the Fonfrias Law Group is an Illinois bankruptcy lawyer and financial rescue expert with years of experience guiding people in financial distress through the bankruptcy process and helping Chicago homeowners avoid home foreclosure. Rich Fonfrias offers all types of financial legal services including bankruptcy repair, bankruptcy avoidance, foreclosure avoidance, loan modification services, mortgage repair, credit repair, tax reduction and tax lien services. As one of Chicago's top bankruptcy lawyers, Rich Fonfrias can help you make a fresh start, through effective legal strategies that will improve your financial health and solve your financial problems.

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Let Chicago bankruptcy lawyer Rich Fonfrias of The Fonfrias Law Group show you how to raise your credit score, repair a poor credit score after bankruptcy or foreclosure, and build and maintain a high credit score rating. Rich is happy to speak with you over the phone, online or to meet with you at his Chicago law office. Fonfrias Law offers a complete range of financial legal services in the greater Chicago area, including financial rescue, Illinois credit repair, financial legal services, loan modifications, tax reduction, tax lien services, bankruptcy and bankruptcy repair. "If you have questions about bankruptcy, foreclosure, credit card debt, loan modifications, tax liens or other financial problems, please send your e-mail today to or call 312-969-0730." -- Rich

If you have questions about bankruptcy, foreclosure, credit card debt, loan modifications, tax liens or other financial problems, please send your e-mail today to or call 312-969-0730