Some Michigan residents take out second mortgages on their homes in order to get cash for other things. Seems like a good idea until one is no longer able to keep up with the new loan payment. Second mortgage lien holders do have the ability to foreclose on the property if one does not keep payments current. However, protections offered through bankruptcy law may help one break free of a second mortgage.
With a Chapter 13 bankruptcy filing, if one's home has little to no equity, a second mortgage becomes an unsecured debt and may be stripped away. This is a process called lien stripping. This is not something that happens right after a bankruptcy petition is approved. One will have to wait and complete the three- or five-year repayment plan before this debt will qualify for discharge.
After the completion of the repayment plan and the lien has been cleared, one may have the lien removed from his or her credit history. One may also request that the lender return the promissory note or deed of trust. Not all lenders will be happy to do these things and may even refuse, but one's legal counsel may be able to help one accomplish these tasks.
It takes a lot to get a lien stripped. However, with the protections offered through bankruptcy law, it is possible to stop foreclosure and clear the debt. Michigan residents with second mortgages on underwater homes can turn to an experienced attorney to help them with the bankruptcy and lien stripping processes.
Source: homeguides.sfgate.com, "How to Strip Away a Second Mortgage Through a Bankruptcy", Accessed on June 20, 2017