Minnesota likely to join majority of states with lien stripping of second mortgages
At the end of last year, the Bankruptcy Appellate Panel reversed a lower court’s decision to bar the stripping of second and third mortgages from homes in Chapter 13 bankruptcy cases.
At the end of last year, the Bankruptcy Appellate Panel reversed a lower court's decision to bar the stripping of second and third mortgages from homes in Chapter 13 bankruptcy cases. Following its decision, the mortgage industry appealed to the 8th Circuit Court, which heard arguments in the case this spring.
While a decision has not been handed down as yet, many expert Twin Cities bankruptcy lawyers agree that it's likely the 8th Circuit will uphold the Appellate Panel's decision.
With the Bankruptcy Appellate Panel's ruling, Minnesota joined the majority of states in allowing individuals to strip a second or third mortgage from their home, a common way for those who file for Chapter 13 to remove their unsecured debts and maintain ownership of their homes.
An affirmation of the Appellate Panel's ruling would solidify the right of Minnesota residents keep their homes after the real estate market bubble burst by removing a second or third mortgage if they are underwater.
There are numerous benefits to allowing unsecured second mortgages to be stripped in these cases, not the least of which is that the claimant gets to keep their home. With the money saved in the dismantling of a second mortgage, more creditors can be paid, and homeowners could save money in the process.
If the decision is upheld, these second mortgages will essentially be morphed into credit card debt and can then be fully discharged as unsecured assets in Chapter 13 bankruptcy cases.
By working with an experienced Minnesota bankruptcy law office, you and your family can minimize the amount you owe and simultaneously maintain possession of valuables like your home and car. The professionals at Atlas Law Firm can guide you through the options and determine which will work best for you.