While most people that file for bankruptcy, do so in response to some kind of financial emergency such as aggressive collection efforts from lenders or foreclosure on their homes or real estate investments, there are generally little known advantages to borrowers within the bankruptcy code that could mean a large difference to the equity they hold in their property. According to Gideon Gratsiani, a South Florida, foreclosure and bankruptcy expert, one of these tools is the “strip off”. The code allows a home owner who has a second mortgage on their homestead to strip off that second mortgage if the first mortgage or other superior lien holders take up all the equity. An experienced attorney can move the bankruptcy court to make an official ruling on the value of a property and by showing that the second mortgage is not secured by any property value after the higher liens, the second mortgage loses its secured status and becomes an unsecured debt, discharged after completion of the bankruptcy. Doing this in a bankruptcy case at the very least involves putting forth the facts about the property and the liens and serving it in compliance with the very strict rules for notifying banks about actions concerning their loans.
While it is common for second mortgage holders to not bother to defend the security of their loan, if they do force the matter to trial in the bankruptcy court, a property owner’s attorney must have the skills necessary to conduct a winning argument concerning the value of the property.