Can My Second Mortgage Foreclosure on My Home in Michigan?
Yes, secondary lien holders have the same legal right to foreclosure on your home as the primary mortgage company. The Michigan foreclosure process is the same for the first mortgage holder as it is for the second mortgage lender. The main reason that it is not as common for the secondary lender to foreclose is because that lender would have to satisfy (pay off or negotiate a settlement) on the first mortgage in order to get clear title to the property. When home values are underwater, it makes it more difficult to work out an amicable arrangement for both lenders. With home values finally starting to appreciate, secondary mortgage foreclosures may begin to increase. In recent years, we have been seeing secondary lien holders circumventing the foreclosure process and just suing homeowners to collect on the debt. If they get a judgment, the next step is to secure a garnishment. This could mean 25% of your net pay being taken each pay period or the creditor emptying your bank account. This has an obvious and devastating effect on your monthly budget. In addition, once the creditor has a judgment in place, they can continue to renew the judgment and collect on the debt almost indefinitely while late charges and interest fees continue to mount. This can severely hamper your ability to qualify for future credit.
Avoid a Secondary Mortgage Foreclosure by Removing the Second Mortgage or Home Equity Loan
One way to avoid a secondary foreclosure sale from occurring is to remove their lien interest by filing a Chapter 13 reorganization plan. This process converts the secondary mortgage or home equity loan to an unsecured d ebt obligation and allows you to pay only what you can reasonably afford to pay over a 36 - 60 month time period. Whatever balance that is unpaid is legally eliminated at the completion of the process through a court discharge.
Stop a Michigan Foreclosure Sale and Reduce Your Debts
Filing for Chapter 13 protection will stop a Michigan mortgage foreclosure sale regardless of whether it is initiated by the first or secondary lender. The program also provides unique debt reduction opportunities such as:
- A reduced interest rate on vehicle loans and possible reduction in principal balance owed;
- Defer, consolidate and likely reduce unsecured debt obligations such as credit cards, medical bills, personal loans, loan deficiency debt, etc.;
- Stop other creditor actions, such as vehicle repossession.
Stop a Lawsuit, Judgment or Garnishment by Filing for Bankruptcy Protection
If your secondary lien holder pursues the debt or is granted a judgment or garnishment, it can be immediately stopped by filing a Chapter 7 or Chapter 13 bankruptcy. By filing Chapter 7 you will eliminate the debt, but not the creditor's lien interest in your property. By filing for Chapter 13 protection you can reduce the debt and eliminate the remaining debt balance as well as the lien interest at the completion of the debt consolidation program. We will review both options with you in detail at a free consultation and recommend your best course of action based on your total income, debt and long term goals. To understand all of your foreclosure and debt relief options, call our office today at 866-261-8282 to speak with a licensed Michigan bankruptcy attorney. We offer free consultations and comprehensive advice.