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How Is a Second Mortgage Handled During Bankruptcy?
What happens to a second mortgage like a Home Equity Loan or Home Equity Line of Credit (HELOC) in bankruptcy depends on several factors. Will you file for Chapter 7 or Chapter 13? How much is your home worth? How much do you still owe on your first mortgage, and do you want to keep the home?
If you are considering bankruptcy in 2026, our Kerrville, TX bankruptcy attorney can help you answer these questions. We will work closely with you to help you understand what you would need to do to keep your home.
What Happens to a Second Mortgage in Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is designed to wipe out most unsecured debt. A Chapter 7 discharge can also get rid of your personal liability to pay back a Home Equity Loan or Home Equity Line of Credit (HELOC), but it doesn’t get rid of the lien on your home.
What Are the Pros and Cons of Filing for Bankruptcy?
Millions of Americans struggle with debt. In many cases, debts are necessary, and they can help us buy a home, vehicle, or education. Other debts may come about because of unforeseen financial difficulties, such as credit card balances that become impossible to repay after a job loss, divorce, or other financial setback.
If you have significant debt, you may be looking at your options, including the possibility of filing for bankruptcy. Bankruptcy can provide powerful relief, but it also has real drawbacks. It affects your credit, may put some property at risk, and requires you to make detailed financial disclosures to the bankruptcy court.
As you review your finances and consider the path ahead, it is important to understand both the potential benefits and the disadvantages of pursuing bankruptcy. Our Schertz, TX bankruptcy attorney is experienced and friendly and can walk you through whether filing for bankruptcy in 2026 makes sense for you.
4 Reasons Bankruptcy is Not as Bad as You Think
Bankruptcy often carries a stigma, conjuring images of financial ruin and long-lasting consequences. However, the reality is far more nuanced. Facing a substantial debt can make it seem like there is no way out, and bankruptcy can be a powerful tool for financial recovery and a more hopeful future.
Our New Braunfels, Texas consumer bankruptcy lawyer can help you understand four key reasons bankruptcy might be a more positive option than initially thought.
Bankruptcy Offers an Opportunity for Customized Financial Education
Very few of us got an excellent financial education, whether from our parents or the school system. It’s easy to remember one-liners like "Don’t live beyond your means," or "Save money every paycheck," but it’s much harder to apply those concepts well when real-life problems come up all the time. What do you do when you have to make a decision between buying diapers and saving money? Life as an adult is full of these difficult choices.
What Are the Odds a Creditor Shows Up to My Bankruptcy Hearing?
Most people getting ready to file for bankruptcy are very nervous about the idea of appearing at a hearing with creditors present. Fortunately, that is usually not how things go.
What people commonly call a bankruptcy "hearing" is really the meeting of creditors, also known as the 341 meeting. Almost everyone who files bankruptcy has to attend one, but creditors are not required to show up. For the average person filing Chapter 7 or Chapter 13 bankruptcy, the meeting is usually short, straightforward, and much less dramatic than people expect.
If you are considering bankruptcy in 2026, our San Antonio bankruptcy attorney can explain exactly what to expect before your meeting so you aren’t worried about any surprises.
"Avoiding" a Judgment Lien on Your Home in Chapter 13
A creditor who wins a lawsuit against you may record its judgment in the county where you own real estate. That record can create a judgment lien or, in Texas, create a problem that clouds the title to your homestead.
Bankruptcy gives homeowners a way to deal with many judicial liens. Both Chapter 7 and Chapter 13 bankruptcy can provide a procedure for removing, or "avoiding," judgment liens. However, Chapter 13 can be especially useful when the judgment lien is only one of several problems threatening your home.
If you are struggling with a judgment lien or overdue mortgage payments in 2026, our Kerrville Chapter 13 bankruptcy lawyer can help.
What Is a Judgment Lien on a Texas Home?
A judgment lien usually begins with a lawsuit. For example, let’s say you stop paying a credit card after losing your job. The creditor sues you, wins a judgment, and then records an abstract of that judgment in the county where you own property.
Secured Creditors' Proofs of Claim in Chapter 13
A Chapter 13 bankruptcy allows you to reorganize your debts through a court-approved repayment plan lasting three to five years. If you want to keep property that secures a loan, such as a vehicle or home, your plan must explain how the debt will be handled.
However, listing a secured creditor in your bankruptcy documents and proposing payments in your Chapter 13 plan may not be enough for the creditor to receive money from the trustee. A proof of claim usually must be filed before a creditor can receive distributions through the plan.
This filing can have a major effect on whether you keep important property and whether your bankruptcy case proceeds as expected. If you are considering Chapter 13 bankruptcy in 2026, a New Braunfels Chapter 13 bankruptcy lawyer can help you understand how secured claims should be treated.
The Financial Effect of Surrendering Collateral in Chapter 13
Chapter 13 bankruptcy gives you several ways to deal with property tied to secured debt. You may be able to keep your home, vehicle, or other property and continue paying for it. You may also decide that keeping the property no longer makes financial sense.
In these situations, surrendering the collateral gives you room to rebuild. However, surrender does not always erase the entire debt immediately. The creditor may sell the property and file a claim for any balance left over.
If you are considering surrendering collateral in a Chapter 13 case in 2026, a Schertz bankruptcy attorney can explain how the decision may affect your payment plan, remaining debt, and monthly budget.
What Is Collateral in a Chapter 13 Bankruptcy?
Collateral is property that secures a debt. If you stop paying, the creditor has the right to take and sell that property. The most common examples include a home securing a mortgage and a vehicle securing an auto loan. Other examples of secured debts include business equipment, furniture, and jewelry.
A Chapter 7 "Means Test" Calculation Adjustment
The numbers used in the Chapter 7 bankruptcy means test change from time to time. Even a fairly small adjustment can affect whether someone qualifies for Chapter 7.
Because the correct figures depend on exactly when your case is filed, you should not rely on an old online calculator or assume that numbers from a previous bankruptcy case still apply for a 2026 bankruptcy filing.
A Boerne bankruptcy attorney can complete the calculation using your income, household size, debts, expenses, and anticipated filing date.
What Is the Chapter 7 Means Test?
Chapter 7 bankruptcy allows people who qualify to discharge many unsecured debts. However, Congress created the means test to screen out higher-income debtors who may have enough money available to repay part of what they owe.
Protecting Excess Home Equity Through Chapter 13
Texas homestead protections are among the strongest in the country, but they aren’t unlimited. If you own a home with more equity than the exemptions cover, filing for Chapter 7 bankruptcy could put that equity, and potentially your home itself, at risk.
Chapter 13 bankruptcy offers a different path. For many Texas homeowners with substantial equity in their homes, Chapter 13 is not just a better option than Chapter 7. It may actually be the only practical way to keep the home, protect the home’s equity, and still get meaningful debt relief. Our San Antonio bankruptcy attorney can explain more.
Can You Have Too Much Home Equity to File for Bankruptcy?
To understand why too much equity creates a problem, it helps to understand how the homestead exemption works. In Texas, the homestead exemption protects up to ten acres of land and any improvements on it. The equity itself is unlimited for qualifying homesteads under Texas law, one of the most generous protections in the country. However, the unlimited homestead exemption only applies in state court proceedings. In a federal bankruptcy case, there are limits.
What Does an IRS Tax Levy Mean in Texas?
Receiving notice that the IRS intends to seize your property or income is one of the most alarming things that can happen. If you have unpaid federal taxes and the IRS has started sending notices, finding out exactly what an IRS tax levy is is the first thing you need to do so you can understand your options. Our Boerne, TX bankruptcy attorney helps good people in tough situations deal with IRS tax levies. Call us today at 210-342-3400.
What Is an IRS Tax Levy?
A tax levy is the IRS's legal right to seize your property or assets to satisfy a tax debt you have not paid. Unlike a tax lien, which is a legal claim against your property, a levy is the actual taking of that property. Once the IRS follows through on a levy, they can get what you owe directly from your assets without going through a court first.
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