For many years, conventional wisdom and practice has stated that, during bankruptcy, certain debts would automatically be lessened or even eliminated. One of these was second mortgages. According to the U.S. Supreme Court, this is no longer the case.
In a recent ruling, the Supreme Court unanimously decided that bankruptcy would not automatically void second mortgages. This held true even if the home wasn’t worth even the first mortgage amount, called “being underwater.” This is not to say the second mortgage must remain, but it is now up to the lender to decide.
Bank of America led the charge to the Supreme Court. They argued that the homeowners took on the second debt, and they will be able to repay it when the value of the home increases again. Homeowners, on the other hand, declared their second loans worthless.
Regardless of the Supreme Court ruling, filing for chapter 7 or chapter 13 bankruptcy can help individuals and families in Ohio who are facing unexpected life changes. Sudden unemployment, medical bills and other factors can cause bills to pile up. Bankruptcy can give you a breath of fresh air.
For those who fall below the state median income level and are in need of debt relief, chapter 7 can liquidate your assets and give you a fresh start. Those above this level can utilize chapter 13 bankruptcy to pause payments and let you regain your financial footing again.
Those who are interested in learning about their options when it comes to debt relief should contact an experienced attorney. They can analyze the situation and recommend a course of action.