Lansing, Michigan (PressExposure) November 09, 2009 -- Declining home values in mid-Michigan have caused home values to depreciate or go âunderwater,â which means below the amount that some homeowners owe. Now there is a new form of relief available in Michigan Bankruptcy Court.
For homeowners with second mortgages, if the value of your home has declined to less than the total value of your first mortgage, the second mortgage has, in effect, become an unsecured loan.
When filing a Michigan Chapter 13 bankruptcy, which is a repayment plan, the bankruptcy filers usually pay 100% of secured mortgage debts only. If the second mortgage is entirely unsecured, it can be âstrippedâ of its lien on the property and pay only the same percentage amount as all other unsecured debts, which is usually a smaller percentage than a secured debt.
Treatment of unsecured debts varies from individual Chapter 13 bankruptcy plan depending upon the bankruptcy filerâs income, debts and allowable expenses. However, unsecured debts may be paid even as little as 10% or even just 1% under the right circumstances. Which is based of the bankruptcy filerâs income throughout the course of a Chapter 13 bankruptcy plan, and discharged of remaining liability upon completion of the plan of debt reorganization.
How a second mortgage is stripped varies from the Eastern and Western District of Michigan, and from courtroom to courtroom in procedure, but not in the end result. Some judges will allow the second mortgage to be stripped in the Chapter 13 bankruptcy plan itself. Some require the value of home to be proved or disproved at an adversary proceeding. The most important determining factor remains, however, what the value of your home is at the time of filing for a Michigan Chapter 13 bankruptcy.
Sometimes, however, bankruptcy is not the answer. The best solution may be to have your bankruptcy attorney negotiate directly with your creditors, for a reduced amount, a debt consolidation or repayment plan you can live with.
The law firm of Lansing, Michigan bankruptcy attorney Gene Turnwald, will help you determine the best solution for your financial situation. If you are seriously considering bankruptcy, contact Lansing bankruptcy attorney, Gene F. Turnwald, for a free consultation. Mr. Turnwald may be reached at (517) 347-6700 or through the firm's website, http://www.bankruptcylansing.com.