A New Jersey chapter 7 bankruptcy case discharges the personal liability of a second mortgage. This means that the second mortgage company can never pursue the homeowner for the money that is due on the loan, not matter how much the debtor falls behind with their mortgage payments. If the homeowner is behind with payments, the mortgage company may foreclose on the property and take the house, only. If the homeowner wishes to keep the house, the payments must be current or the homeowner must work out some other arrangements, such as a loan modification.
Many people believe that a home equity loan in New Jersey is not a mortgage. A home equity loan is always a type of mortgage and typically a second mortgage.
A chapter 7 trustee will only sell property that has a substantial value, in excess of the mortgage balances. The decision of the trustee to sell property is not effected by whether the debtor is current or behind with their payments.
A chapter 7 discharge does not eliminate the second mortgage lien on the property. This means that the second mortgage lien must be paid if the homeowner wishes to sell the property at any time. The lien will continue to exist whether or not the mortgage company forecloses on the property.
You may contact Robert Manchel, the chapter 7 bankruptcy lawyer, to discuss your questions regarding a second mortgage and bankruptcy protection at 866 535 5655.