Avoid Foreclosure in Atlanta, Georgia by Wiping out Your Second Mortgage in Chapter 13 Bankruptcy

Foreclosures in Atlanta, Georgia have caused property values in the Atlanta metro area to decline but homeowners may avoid foreclosure and increase home values by filing Chapter 13 bankruptcy. Most homes in the Atlanta and in other metro areas such as Alpharetta, Jonesboro, and Decatur have declined in value over the past four years. This problem is compounded by the fact that many houses are secured by second mortgages or home equity lines of credits that homeowners are unable to afford. Even if homeowners are able to sell the property for a price high enough to cover the first mortgage, the prospect of recovering enough sales proceeds to pay the second mortgage is low. Homeowners who have first and second mortgages and are facing foreclosure may even remain liable for the second mortgage debt even after the property is foreclosed.

How to Avoid Foreclosure

Atlanta, Georgia homeowners can file Chapter 13 in order to stop paying their second mortgages and completely wipe out liability on the second mortgage liens. Through a process known as lien stripping, bankruptcy changes the status of a second mortgage company from a secured creditor to an unsecured creditor and forces the second mortgage company to cancel the security lien on the property upon the final discharge of a Chapter 13 case. Under Bankruptcy Code Section 506 (a) and (d), an attorney can ask the bankruptcy court to reclassify a secured second mortgage or line of credit as an unsecured debt, thus stripping the lien. Once a debt is classified as unsecured, between 0% and 100% of the debt is paid as an unsecured claim. At the end of the Chapter 13, the court issues an order canceling the second mortgage lien. During the pendency of the Chapter 13 case, the debtor does not have to make the monthly second mortgage payment!

Seem like magic? It actually makes a lot of sense. The key is that a mortgage is a debt that is secured by a tangible piece of property. The holder of the first mortgage has the right to the first bite of the tangible property meaning that because they were first, the debt that they are due must be completely satisfied before the second mortgage holder can move in and be compensated. Because the property is underwater, that first mortgage holder would not be fully satisfied in the event that the property was sold. Therefore, the second mortgage holder would not have a right to any portion of the amount gained by the sale. In the case of an underwater property, the second mortgage is de facto unsecured. The court acknowledges this by stripping the lien and reclassifying the mortgage as an unsecured debt. The key to a successful lien stripping is that the second mortgage must be completely unsecured, meaning that the fair market value of the property must be less than the balance of the first mortgage.

How to Avoid Foreclosure with Effective Legal Counsel

If your home is underwater and you have taken out a second mortgage, bankruptcy can help. Please consult an experienced bankruptcy attorney in Atlanta, Georgia. For a free initial consultation please contact the Law Offices of Charles Clapp at 404.585.0040.


Charles is absolutely a brilliant attorney! He is a critical thinker and determined problem solver. He is very accessible, even via text. If he is in court, his ability to multi-task, you can feel safe and secure in knowing he is handling any issues or concerns. I entrust him with my future, he is a uniquely talented attorney who always challenges himself to achieve the absolute best outcome for his clients.



I was very satisfied with Mr. Clapp services. He is a man of his word and did everything he told me he would. I would highly recommend him.



I came to Mr. Clapp by referral with a complicated case involving both personal and business debts that were out of control. Mr. Clapp evaluated the situation and gave me options that I was not even aware of. He knows his stuff, executed flawlessly, and I have been able to start over. I highly recommend Charles Clapp if you have debt or bankruptcy issues. Listen to his advice, he knows his stuff. I consulted with several other bankruptcy attorneys prior to retaining Mr. Clapp, and they did not have the same breadth of knowledge that Mr. Clapp brought to my case.



I selected Charles Clapp to handle my bankruptcy based on his already positive reviews and I am glad that I did! He was very accommodating to my schedule and made my negative life experience positive. I was actually very surprised how easy he made the process. Life happens and it’s great to be represented by someone that understand that!!! Stop your attorney search with Charles Clapp!!!