Can Chapter 13 Bankruptcy Help Me Deal With An Underwater Mortgage?

house mortgage

If you’re a homeowner, you know that sometimes dealing with a mortgage can be complicated. Unfortunately, it’s not that uncommon for property owners to accrue debt from falling behind on mortgage payments. When this happens, a Chapter 13 bankruptcy may be the solution to this financial problem. Our knowledgeable law firm can help you successfully file for bankruptcy to help deal with your underwater mortgage. To learn more, continue reading this blog or reach out to an Orange County Chapter 13 Bankruptcy Lawyer today.


Taking out a mortgage to pay for your home means that you’re borrowing money from a lender. Home equity refers to the difference between your home’s market value and the amount of money you’ve borrowed to pay for it. Until you pay off your mortgage, the lender will hold a lien – which is a legal document that allows them to repossess your property if you don’t pay off your debt.

An “above water” mortgage means that your home has enough equity to cover the cost of the loan when you sell your home. In most cases, you bought your home with an above-water mortgage. Alternatively, an “underwater” mortgage is the exact opposite: your home equity is less than the amount you owe for your mortgage.


There are various reasons why a person might not have enough equity to cover their mortgage. Many times it’s because a homeowner has not taken the proper steps to increase their home equity. Other common reasons include:

  • The market value of the home went down
  • The home was sold for an overpriced cost
  • The homeowner took out additional loans to finance their property
  • The homeowner fell behind on mortgage payments due to financial hardship


There are many different ways that a Chapter 13 bankruptcy may help you handle your underwater mortgage. This type of bankruptcy restructures your finances and repays your debts in three to five years with a court-approved plan. If you have mortgage debts, the court will likely include these in your repayment plan. In Chapter 13, the plan usually focuses on repaying secured debts (including mortgages) first.

Another way that Chapter 13 bankruptcy can help is by removing liens from any additional loans you have on your home. This ensures that these mortgages can be considered unsecured debts, and you won’t need to pay them off if you qualify for Chapter 13 bankruptcy.

Are you considering filing for Chapter 13 bankruptcy in New York? You might want to speak with a dedicated bankruptcy attorney who can guide you through the legal process. Thankfully, our highly experienced legal team is on your side! Contact the Law Offices of Michael D. Pinsky today for an initial consultation.

Read Our Recent Blog
View More