question about 2nd loan

[JOEYBOY]

If i file for chapter 7 what happens to the 2nd loan? will it go away or do I have to file chapter 13?

[justbroke]

It will not simply go away. You will no longer be legally liable to pay the 2nd, but the 2nd lienholder will be able to pursue foreclosure should they choose to do so. Filing a Chapter 13 allows you to "strip" the 2nd lien off if the value of the property is less than the value of the 1st lien (or any subordinate lien).

What are you trying to do? Are you underwater? If so, how far underwater are you?

[JOEYBOY]

I'm trying to get rid of the 2nd loan , my house is 400K and i owe 465K ( 65K is the 2nd loan) also i lost 40% of my income so right now im just making it but if i can get rid of the credit card payments and the 2nd loan i can keep the house and move on so at this point i dont know should i do a 7 or 13?

[justbroke]

If the home is REALLY worth $400k then a Chapter 13 could strip the 2nd loan off. You'd need a professional appraisal because that is very close to giving the second lien as little as $1 in security, which means it would be secured. Strategically, some have done a Chapter 7 discharging all liens and then negotiating with the 2nd lienholder for as little as 10%. However, if you really want the guaranteed method, then a Chapter 13 lien strip is the only way to know for sure.

A Chapter 13 requires regular income and you may end up paying something back to unsecured creditors. It's possible that this may even be a 100% payback, depending on what your disposable income calculation yields.