According to a recent study, the typical Rhode Island house lost 25% of its value last year. For many homeowners, the only alternative to losing a home to foreclosure may be to modify their mortgage. Fortunately, current bankruptcy laws allow for many Rhode Island homeowners to dramatically reduce their monthly mortgage payments.
If your house is valued at less than you own on your first mortgage, you may be able to eliminate most of yoursecond mortgage with a bankruptcy (for owners of rental properties or investment real estate, it’s even better: you can often use a RI bankruptcy filing to modify both the first and second mortgage). This can be done by filing for a Chapter 13 bankruptcy: you eliminate your second mortgage obligation and instead make a series of monthly payments for a limited period of time (between 36 and 60 months, depending on your income).
Given the magnitude of most second mortgages, this approach can result in significant savings. For example, if you have a $40,000 second mortgage, you could potentially eliminate all but $7,200 of your debt in a Chapter 13 bankruptcy.