As many of us know, the real estate bubble has resulted in millions of homes being upside down…that means, you owe more on the home than it is worth.  And that means you don’t really own a thing.  In essence, you are simply renting your own home. And if you bought or refinanced a house from 2003 to 2010, there is a good chance you are indeed upside down.  And that is not all the reason you purchased a home…a big part of the American Dream is that your home will steadily increase in value and by the time you retire it represents real wealth.  The real estate bubble has quashed that dream for many of us.

But there is a way to fight back and get your home debt closer to the home’s value.  This can be done through what is known as stripping the second mortgage.  That is to say, it can be eliminated just like a credit card and you no longer have to make that payment.  And you still get to keep the house.  This can be done under two very specific conditions, but if those conditions are met, it can save you thousands and thousands of dollars.

The conditions are as follows:

1) You have a first and second mortgage; and

2) The value of the home is less than the balance

So, what is house worth?  Sadly, as of May 2011, the housing market has experienced 57 straight months of declines in value and I have found that most people over estimate the value of their home and it likely that your house is worth less than you think.  But that can be good news

Note that the stripping the second mortgage can ONLY BE DONE IN CHAPTER 13s.  But even if you qualify for a Chapter 7, and want to strip a second you need to file a Chapter 13 and you certainly can.  I have had many clients make this decision.  Sure, it means you have monthly payments but they are often less than the second and they only last three to five years vs. 20-30 years if you were to keep second mortgage in place.