Lien Stripping
If your 2nd Mortgage is removed because of a bankruptcy filing it is known as “lien stripping.” This happens when, for example, your home doesn’t have enough equity to cover the first mortgage and the property value is lower the first mortgage. Lien stripping is an option in both Chapter 11 and Chapter 13 bankruptcy plans.
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Lien stripping is a powerful part of Chapter 13 that not widely used, but should be. An unsecured 2nd mortgage can be completely wiped out in a Chapter 13 debt relief plan. The best part is you get to keep your home under Chapter 13.
Lets consider a real life San Diego example: A client’s San Diego home is worth $510,000.00 but you owe $535,000 on the 1st mortgage. In this instance you have no equity or, in other words, you are upside down. If you have a 2nd mortgage that has a balance of about $60,000.00 the 2nd mortgage is totally unsecured and can be wiped out under the Chapter 13 bankruptcy plan. Now, if the home is really worth $540,000.00 than the 2nd mortgage cannot be stripped because it is secured by $5000.00.
There is current legislation pending that would allow Bankruptcy Courts to modify your 1st mortgage.
We all know that a lot of San Diego homeowners got 100% loans a couple of years ago. With falling home values many San Diego residents are living the above scenario. San Diego bankruptcy lawyers can help because the percentage of the lien stripping is determined by several factors. You will want to make sure your bankruptcy lawyers get you the maximum.
The mortgage and home loan companies will be very aggressive in trying to collect any mortgage and home loan debt owed. You need an aggressive bankruptcy lawyer to fight back. For over 35 years the Law Office of Harold D. Thompson has helped thousands of individuals in San Diego, Southern California and California get the fresh start and home loan relief they deserve. We can file your bankruptcy case for as little as $800.00. Call our office today at 619.615.0767 or visit our other websites at San Diego Bankruptcy Lawyer Blog or My San Diego Bankruptcy for more information.