How is a 2nd mortgage stripped in a bankruptcy?
A second mortgage can only be stripped in a Chapter 13. The possibility for stripping a mortgage depends on the value of the debtor's home, the 1st mortgage balance, and the 2nd mortgage balance. Stripping mortgages is procedurally unique in each jurisdiction. Different judges have different requirements.
Once the Chapter 13 is filed, it is up to each creditor to file what is commonly referred to as a "proof of claim." Once the proof of claim is filed, the attorney usually has a certain time period to file a motion on behalf of the debtor to strip the mortgge.
The judge may decide to hold a hearing on the matter or, if it is uncontested, simply grant the stripping. What does that mean? It means it will change the treatment from secured to unsecured debt and the lender will get what all the other unsecured creditors are getting. Once the lien is stripped and the debtor is out of the bankruptcy, the debtor will only have to pay one mortgage every month.
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