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What 2nd and 3rd Mortgages Are
A second mortgage is a mortgage loan against real property which is taken out after another mortgage is in place. In some instances real estate purchasers take out a second mortgage at the same time real estate is purchased. In other instances a real estate owner may take out another mortgage including a home equity line of credit after the real estate is purchased. In either instance the second mortgage is subordinate to the mortgage which was already in place (the first mortgage). A third mortgage is a mortgage loan against real property which is taken out after both a first mortgage and second mortgage is owed against real estate.
When 2nd and/or 3rd Mortgages are Avoidable
If a Chapter 13 bankruptcy client owes more, even one cent more, than the balance on the first mortgage, then the client may file an adversary proceeding within the client’s case to avoid the second mortgage. The client must obtain an appraisal on the client’s property to submit with the adversary proceeding. The bankruptcy attorney will file an adversary proceeding and will file the appraisal as an exhibit. A filing fee of $260.00 must be paid by the Chapter 13 bankruptcy client for the filing of the adversary proceeding. A third mortgage would be avoidable in a Chapter 13 bankruptcy if the client owes at least one cent more than the sums of the first and second mortgages.