How to File Chapter 13 Bankruptcy With a Second Mortgage in Florida
A second mortgage is a secured home loan from a lender that is subordinate to another loan. Both the first and second mortgage are secured by the same asset--that is, the home or real property. In effect, a second mortgage is a loan against the equity in the asset. In Florida, Chapter 13 bankruptcy can remove, satisfy or discharge a second mortgage once the debtor fulfills his court-ordered debt repayment plan set by the bankruptcy court.
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Instructions
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Find out whether you are eligible for Chapter 13 bankruptcy. To be eligible for Chapter 13, debtors generally must have a regular source of income that exceeds their reasonable living expenses, less than $336,900 in secured debts and less than $1,010,650 in unsecured debts.
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Determine which Florida bankruptcy court is most convenient for you (see the Resources section of this article).
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Complete your court-approved credit counseling. The 2005 Bankruptcy Abuse Protection and Consumer Protection Act requires debtors to complete the course within 180 days prior to filing a bankruptcy petition. See the Resources section of this article for a link to the Department of Justice list of approved credit counseling programs.
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Download the Voluntary Petition for Bankruptcy from the U.S. Courts website. If you do not have regular Internet access, you can obtain a copy from the court clerk at the bankruptcy court.
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Complete the petition, including the name of the lender for your second mortgage in your creditors matrix list, and file it with the bankruptcy court.
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Pay the filing fee. As of December 2010, the fee for Chapter 13 bankruptcy is $274. Low-income individuals may, however, qualify for a waiver. If you are low income, complete a Fee Waiver Request Form and file it with your petition. A copy of this form is available from the bankruptcy court clerk.
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Tips & Warnings
Under section 506(a) of the federal bankruptcy code, a second mortgage may be wiped out through Chapter 13 bankruptcy if the fair market value of your home is at or below the outstanding balance on the first mortgage. Example: The debtor's home is worth $100,000 but the first mortgage is for $150,000.
Filing for bankruptcy has serious financial and legal consequences. Talk to an attorney or other professional about your situation, the consequences of bankruptcy and any alternatives you may have.
Court-ordered debt repayment plans last approximately three to five years.
