Chapter 13: Severance of a Home to Lender
Bankruptcy is a tool that is used to help you get back on your feet. Our
lawyers want to help you lead a productive and happy life, and part of
that process is addressing your debt. Let us use our experience to find
a solution for you and your family.
At Sulaiman Law Group, LTD., we provide our clients with sound legal advice
and representation. We are knowledgeable of the law and skilled at understanding
and guiding clients through legal techniques and processes. Located in
Oak Brook, Illinois, we serve clients in Chicago and the surrounding areas.
Contact a Chicago bankruptcy attorney to discuss the possibility of a severance.
Contact us online or by calling us at 312-313-1613.
Severance Is Another Option
There are a number of different options that are available to individuals
who are trying to deal with mortgage debt. Individuals might use a
deed in lieu, a
short sale or a
foreclosure. For people who do not want to waste money or time on costs there is another
When you buy a house, the mortgage is a pledge for the title to real property.
You sign a promissory note that connects you to the loan by making you
responsible for payment of the mortgage. An individual in a
Chapter 13 bankruptcy can sever the mortgage from the note in full satisfaction of the secured
claim. So what does that mean? By severing the note from the mortgage,
you essentially surrender the interest in the property to the mortgage
holder, thereby relieving yourself from personal liability on the secured
claim. Severance is a very powerful tool.
Example of a Severance
To put this concept into context, let's take the example of Blake and
Crystal.* Blake is a doctor and Crystal is a lawyer. They have a lot of
money in the bank and they own quite a few assets. Additionally, they
own a home that is worth $400,000 dollars, and they owe $400,000 on the
first mortgage and $100,000 on the second mortgage. In total, they owe
$500,000, which means the house is upside down - they owe more on the
house than it is worth. Because Blake is a doctor and Crystal is a lawyer
and they make a good living, their lender is not responding to any kind
of settlement on the house. Blake and Crystal can file a Chapter 13 severance.
In doing this, the title of the home remains in their name, but their
personal liability for the secured claim (which is $400,000) is severed
and they owe the bank nothing for that portion. Additionally, Blake and
Crystal will not lose one asset in this form of bankruptcy.
Contact a Chapter 13 Bankruptcy Attorney to Explore Your Debt Relief Options
Our attorneys understand all aspects of debt relief.
Contact us online or by calling us at
*Blake and Crystal are fictitious characters created for the purposes of
explaining and illustrating various bankruptcy situations.