News & Insights

For homeowners facing financial pressure, lien stripping is only available through Chapter 13 or Chapter 11, not Chapter 7.

Under certain bankruptcy laws, unsecured mortgages can be reduced or removed when the property value is lower than the total owed on senior loans. This process, known as lien stripping, allows homeowners in Chapter 13 or Chapter 11 to eliminate second or junior mortgages that are no longer backed by equity.

A second mortgage may be removed through Chapter 13 bankruptcy if the home has no remaining equity to support it.

Homeowners can technically negotiate a short sale on their own, but it is strongly recommended to involve a real estate professional or attorney experienced in short sales.

A short sale may lead to tax consequences when the lender cancels part of the remaining debt after the sale is completed. In such cases, the forgiven amount can be reported to the homeowner through a 1099-C form, which treats the canceled debt as taxable income.

A short sale becomes more difficult when there is a second trust deed on the home because the second lien holder often receives little or no payment from the transaction.

Short sales can come with serious hidden obligations if the paperwork is not reviewed carefully.

One major risk in a short sale is that the homeowner may still be responsible for the remaining loan balance after the sale.

Banks often choose short sales because they allow the loan to be reset with a new borrower who qualifies for the reduced value of the property.

A short sale occurs when a property is sold for less than the amount owed on the mortgage. This usually happens when the home’s market value drops below the remaining loan balance.

A home equity line of credit, or HELOC, is a loan taken after buying a home that lets the homeowner borrow against equity for expenses like cars, credit card debt, or travel.

In California, anti deficiency statutes protect homeowners by limiting a mortgage company’s ability to sue for the remaining loan balance after a foreclosure sale. When a property is sold for less than what is owed, the lender usually cannot pursue the borrower for the difference, known as the deficiency, if certain conditions are met.

Walk away refers to situations where a homeowner may be able to leave a property under certain legal conditions without continuing responsibility for the mortgage, depending on applicable rules.

Walk away refers to situations where a homeowner may be able to leave a property under certain legal conditions without continuing responsibility for the mortgage, depending on applicable rules.

In California, the homestead exemption is currently $75,000 for most homeowners and can go up to $175,000 for individuals over 65 or those who are disabled.

A homestead exemption does not stop or prevent foreclosure on a property. Instead, it protects a set amount of home equity from unsecured creditors by shielding it from certain types of liens. This means it helps safeguard equity in the home, but it does not interfere with the foreclosure process itself.

In some cases, filing Chapter 7 bankruptcy does not automatically mean losing a home.

If payments are missed during a Chapter 13 bankruptcy, it does not automatically end the case. In some situations, an attorney can request permission from the court to allow missed payments to be addressed without dismissing the plan.

Chapter 7 bankruptcy is a liquidation process where a trustee may sell assets to repay debts, while Chapter 13 is a structured repayment plan designed to help individuals catch up over time.

Bankruptcy can be a strong option for homeowners who are behind on mortgage payments or facing foreclosure.