A former debtor in a Chapter 7 bankruptcy case recently hired my firm to get rid of the lien that survived the bankruptcy. This, in spite of the recent Supreme Court Decision handing banks yet another victory. Read the New York Times (@NYTimes) Article, here. The Supreme Court ruling will now prevent underwater homeowners from easily discharging home equity loans and other types of second mortgages in Chapter 7 bankruptcies, according to the New York Times. Keep in mind that junior mortgages remain eligible to be “stripped” down or avoided and removed under Chapter 13 of the Bankruptcy Code. Certain restrictions apply.
Back to the Chapter 7 client. When a debtor discharges his debts in a Chapter 7 bankruptcy, even the mortgage debt has been eliminated. HOWEVER, mortgage lenders continue to enjoy the benefit of a lien against the real property of the debtor’s home. So, while the mortgage company can never come after the debtor to collect on the mortgage debt itself, unless that they negotiate to release or remove that junior mortgage (also known and home equity lines of credit), the lien will simply remain attached to the home. That’s where a debt settlement lawyer can help.
If the Supreme Court won’t help consumers who need it most, then certainly a debt relief lawyer can and one debtor just obtained a settlement and release of a junior mortgage lien that was previously discharged in his Chapter 7 Bankruptcy. He will pay only 10% of the original balance owed on the junior lien and when he is finished paying 36 monthly payments, the lien will be released. In just three (3) years, he will only have one mortgage! Now that’s a win for consumers.