New Jersey "Strip Off" of Second Mortgages

As a general rule if there is a mortgage secured by your residence it must be paid. This would also include equity lines and lines of credit which are secured by second or third mortgages on your residence. However, there is an exception, at least when a Chapter 13 Bankruptcy is filed. If the amount owed on the first mortgage exceeds the value of the real estate, then the second mortgage can be eliminated and treated as an unsecured creditor. The rationale for this decision is that since there is no equity for the second mortgage to attach to, it is just an unsecured claim. Whether you reside in Cherry Hill New Jersey, Pennsauken New Jersey, Mount Laurel New Jersey or any other towns in New Jersey, if there is no equity in the property after the first mortgage, then a strip down can be accomplished in a Chapter 13 bankruptcy. As a result, when a Chapter 13 Bankruptcy is filed, upon completion of the case and entry of discharge, the second mortgage can be eliminated. The Supreme Court of the United States has agreed to hear a case involving a strip down and a Chapter 7 Bankruptcy in Florida. If the Supreme Court determines that in fact a second mortgage can be eliminated in a Chapter 7, this will be a great option to get a fresh start. However, regardless of which way the Supreme Court sides, the ability to eliminate a second mortgage in a Chapter 13 is still a valuable tool in a bankruptcy attorney tool belt.

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