Consumer Bankruptcy-Second Mortgage and Chapter 13

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The anit-modification provision of section 1322(b(2)does not apply to a wholly unsecured second mortgage on debtor's primary residence. "Wholly unsecured" is the key, because even if there is a $1 of value left securing the second mortgage, the second mortgage is considered partially secured and cannot be modified. See Nobelman v. American Ssavings Bank, 508 U.S. 324, 113 S.Ct. 2106 (1993). A motion to strip the second lien is brought in Chapter 13 bankruptcy proceedings. An independent apprisal on the debtor's primary residence should be performed prior to filing of the petition. If the court grants the motion or rules in debtor's favor in the adversary proceeding, the second mortgage becomes an unsecured debt, and is treated like any other unsecured debt under Chapter 13 Plan. If the debtor fails to complete the payments under the three or the five year plan, the second mortgage is reinstated. The authority for the motion to strip the lien on debtor's primary residence in Florida is In Re Tanner,217 F.3d 1357 (11th Cir. 2000).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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