Home values are up all over California. For some homeowners, however, the increase in value comes with a cost: the reactivation of zombie second mortgage debt. Keep reading to learn what this is. If you are experiencing this issue, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for a free consultation with a bankruptcy lawyer in La Verne CA.
What is zombie second mortgage debt, and how does it affect you?
With one key exception, a second mortgage loan operates similarly to the first mortgage loan on your property. The second mortgage is the last one to be paid off. This means that if the residence is foreclosed on by either lender, the first mortgage holder must be paid in full before the second mortgage holder may recover anything.
Home prices in the United States fell drastically between 2007 and 2008. The median property value in Los Angeles County dropped from $505,577 to $318,075. That’s a drop of 37% in a single year. For a few years, home prices stayed in that range before starting to rise again.
With the abrupt reduction in value, many homeowners found themselves “underwater”–a term that refers to a situation in which the amount of mortgage debt owed on a property exceeds the value of the property. This put many homeowners in a difficult situation. They couldn’t sell their houses until they paid off their mortgage debt or worked out a deal with the lender. They had few choices if they couldn’t make their mortgage payments during and after the Great Recession.
Homeowners weren’t the only ones that suffered. Many people with second mortgages had their security interests vanish suddenly. In some cases, these people talked to a bankruptcy lawyer in La Verne CA and filed bankruptcy. Others took out a second mortgage.
Chapter 13 bankruptcy and mortgage debt
For California homeowners with outstanding second mortgage obligations, Chapter 13 bankruptcy may be an option. You may be able to pay up on unpaid bills in monthly installments over the course of three to five years if you file a Chapter 13 bankruptcy. The mortgage holder won’t be allowed to initiate any additional collection action or move against the property if your plan is approved and you keep up plan payments and comply with any other decisions of the bankruptcy court.
The next step is to request a consultation with a bankruptcy lawyer in La Verne CA. You can reach Law Offices of Terrence Fantauzzi at (909) 552-1238 to get started.