For the full legal details of the following, you'll have to call your attorney, or, if you cannot afford one, Legal Aid. But this morning, I just learned of a very interesting detail of the US Bankruptcy law. It's not very well known, even though it's apparently been the law for quite some time now. But it can definitely benefit those of you using bankruptcy to avoid foreclosure.
Basically, it goes like this. Your first mortgage cannot be eliminated by filing bankruptcy if you plan to continue to live in the home; it can only become one of your debts to be paid under your approved bankruptcy payment plan, assuming the court approves of your plan. BUT, and that's a very big 'but', if you have a second mortgage, it may be possible to totally eliminate it if there is no equity left in the home after the first is accounted for. The elimination doesn't happen instantly. Rather, the first becomes part of your repayment plan and the second is put on hold for the duration of the repayment plan, frequently 3-5 years or more. At the end of that time, assuming the debts have been handled according to the plan, the second mortgage is eliminated.
Something this important definitely is worth a call to an attorney if you have a second to consider.
As always, good luck.
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