The short answer is yes but you will probably need assistance from a good bankruptcy attorney because it can get a little complicated. You can get rid of a second mortgage by using a bankruptcy tool known as lien stripping. It is only for use by people who got upside down on their mortgage which means the mortgage value is larger than the value of the home. When a lien is stripped, a bankruptcy court essentially takes a secured second mortgage (which does have the power to foreclose) and turns it into an unsecured debt by making the lender remove the lien they have on the property.
There are a few requirements you must meet in order to use lien stripping:
- You have to be upside down on your mortgage
- The first mortgage or senior loan must exceed the worth of your house. If it is larger then you could strip a second or even a third loan using this method.
There is one exception though. If you have three mortgages and the house is worth more than your first mortgage but not more than your first and second mortgage added together then you will only be able to strip the third mortgage. If you had to go back and reread that sentence then you have some idea of the complexities involved in lien stripping. Do yourself a favor and contact a bankruptcy attorney before trying to do it by yourself.
Once you have correctly stripped the lien it will be considered similar to credit card debt now that it is unsecured. So, if you filed under Chapter 13 you will have to pay a small portion of the debt through your repayment plan, then it will be wiped away. If you are filing under Chapter 7 then you may not be able to use lien stripping at all because only a few states allow it.