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Eliminating Second Mortgages

Generally any mortgages secured by a home must be paid if the intent is to keep the property. However, when the amount owed on the first mortgage exceeds the value of the home, a chapter 13 bankruptcy can be used to "cram down" the second mortgage and treat the debt as an unsecured debt. Even if there is no equity in the debtor's assets, a chapter 7 cannot be used to accomplish the "cram down". Also, a recent 4th Circuit Court decision, Alvarez v. HSBC Bank USA N.A., holds that both spouses must file bankruptcy to accomplish this if both are on the mortgage.

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