Second Mortgages and Bankruptcy in San Antonio

Lien Stripping in Chapter 13

Determine home value (appraisal or comparable sales)
Compare to first mortgage - if home value is less, second mortgage is wholly unsecured
File motion to reclassify second mortgage as unsecured
Pay as unsecured debt in plan (often 0-10 cents on dollar)
After plan completion, lien permanently removed

Unlimited homestead exemption protects equity from unsecured creditors but does not remove mortgage liens
Home equity rules: Texas limits home equity loans to 80% of fair market value
Non-judicial foreclosure: Can happen in ~21 days - Chapter 13 is critical for saving a home
Lien stripping NOT available in Chapter 7 (Dewsnup v. Timm)

Can I strip off a second mortgage?

Yes, in Chapter 13, if home value is less than first mortgage balance. Not available in Chapter 7.

What about HELOCs?

Treated the same. If fully unsecured, can be stripped in Chapter 13.

Does the homestead exemption help?

It protects equity from unsecured creditors but does not remove mortgage liens directly.

When is the lien removed?

After successful completion of the 3-5 year Chapter 13 plan.

Our research was cited by the federal judiciary as Suggestions 26-BK-3 and 26-BK-5

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