When You Strip Away The Second Mortgage Bankruptcy?

New York law provides that the court's orders as well as the first and second mortgage, act as liens against the property. This means that when the court decision has been made against the client, it works against them as a real estate lien, together with the mortgage, or Home equity line of credit ("HELOC") a lien on the property. Such as act to protect the debt, which must be paid at the time when the country sells or refinances their home.

New York State law, judicial constraint may be "stripped away", which means removal of the lien before and reduced to the unsecured debt, only if the first and / or second mortgages exceed the value of the home. In addition, under New York law, a "homestead exemption" for a spouse $ 50,000 rule judicial constraint. Therefore, if the first and / or a second mortgage, homestead exemption as well as more than property values, legal constraints would be "deprived of far."

In order to strip away the decision constraint, the motion must be brought in the county court where the decision was made and the real estate there.

In today's real estate crisis, many households are "under water". This means that home value is less than the first or second mortgage value.

Bankruptcy court, it is quite common strip away judicial restraint, if it is unsecured by real estate value. Stripping away the decision lien in bankruptcy court means that the debt is converted into unsecured debt, which is either totally completed Chapter 7 bankruptcy, or paid off in accordance with Chapter 13 bankruptcy for pennies on the dollar.

Second or third mortgage may also be deprived of the bankruptcy case away, if the second or third mortgage amount is completely uncertain, "the property. New York Bankruptcy Law provides that until the mortgage is 100% unsecured by real estate, it can be stripped away in unsecured debt. This means that if your client's mortgage, as well as the homestead exemption for a spouse $ 50,000 of value exceeds the property value, then the second or third mortgage to be stripped away in Chapter 13 bankruptcy.

Until now bankrupt party was not allowed to strip away the second or third mortgage under Chapter 7 bankruptcy. However, recently decided to judge the Eastern District of New York Eisenberg (Long Island), has decided to completely unsecured second mortgage may be deprived of the Chapter 7 bankruptcy.

However, if the second or third mortgage lien or a court, even one per cent, to ensure the real value of the property can not be taken down to the unsecured debt.

Bankruptcy court judges in Westchester and Hudson Valley (Southern District New York) has not yet decided whether they will follow the removal of Judge Eisenberg down completely unsecured loans in Chapter 7 cases. In fact, the two bankruptcy cases in the Court of Appeal imposed a lien stripping in Chapter 7 cases.