Ways to Handle Negative Home Equity

Negative home equity occurs when the account of the home loan exceeds amount the home is worth in

the market. When a person is said to have negative equity, it means that he has negative net worth,

which means that his liabilities exceed his assets. It may occur when the property the owner owes,

obtains a second-mortgage home-equity loans, which causes combine loans to exceed the home value.

There may also be instances when the original mortgage was not done at a good rate. Those who are

facing second mortgage or a home equity loan must consult a licensed attorney to discuss the various

options that they have with them. The attorney will tell the client the ways to remove a secondary

mortgage or the total mortgage balance. He will also suggest ways to re-balance their home’s value in

accordance to the current market conditions.

Negative Home Equity

Chapter 13 reorganization plan is very effective in dealing with negative home equity. According to this

plan, if one’s home is the only worth they owe on the first mortgage and then the second mortgage is no

longer considered to be a “secured” obligation and can be removed. The second mortgage, home equity

loan or other lien is converted to an unsecured debt. The procedure is also referred as Lien Stripping and

has a number of benefits. Firstly, it reduces the payments that one gives as a part of monthly mortgage

obligation. Through this plan, the lawyers can help to eliminate a portion if not the majority of the

unsecured debts. One simply needs to put their best efforts during the course of the program which

may extend from three to five years. Once the plan is completed successfully, all documents are filed

with the register of deeds which legally removes the secondary loans or any liens from the property. All

unpaid balances on other unsecured debts, which include credit cards, medical bills, etc. are also

eliminated through this plan. The plan also helps in reducing the mortgage debt by giving zero percent

interest repayment on any mortgage arrearages that one has. All arrearages are spread out through the

period of the plan at an interest rate of zero percent.

Bankruptcy in Michigan

Those who are facing bankruptcy in Michigan must consult the best lawyers to deal with the problem

successfully. Chapter 13 bankruptcy legally stops the foreclosure sale, IRS levy, judgments, car

repossession, garnishments as well as any other type of creditor actions. It also gives debtors an

extended period of 36 to 60 months to deal with their missed payments.