In Chapter 13 bankruptcy how do I cram down a second mortgage?

In some situations, a cram down can help you to get out of a second mortgage. However, the terms of such a move can be difficult and may or may not be available with a Chapter 13 bankruptcy. Each situation is different. And, it is critical to work with an attorney to file such moves to ensure that you can actually file for bankruptcy and keep your home.

Factors to Consider

A cram down occurs when the value of the mortgages in place on the home exceeds the value of the home. Recently, with the housing market’s value falling, many homeowners are faced with upside down mortgages in which they owe more on the home than it is worth. If you have two mortgages, the first mortgage, or primary mortgage holds precedence legally against the other. This means that if a home is valued at $200,000 and you have a first mortgage valued at $170,000 and a second mortgage of $50,000, the second mortgage’s value may be crammed down.

• The key here is to know the implications of these actions. If the second lender decides to foreclosure on the remaining value, he or she can.
• If the home’s second mortgage is completely unsecured, meaning the first mortgage covers all of the value of the home, it may be possible to convert this to unsecured debt which may be discharged.

To make this happen, appraisals on the property are necessary and should be presented with the bankruptcy documents. From there, the bankruptcy trustee must make a decision on how to proceed.