Lien Stripping

Posted by & filed under Chapter 13 Debt Relief.

San Diego Bankruptcy Lawyers

When your 2nd Mortgage is removed because of a bankruptcy filing, it is known as “lien stripping.” This happens when, for example, your home does not have enough equity to cover the first mortgage and the property value is lower than the first mortgage. Lien stripping is an option in both Chapter 11 and Chapter 13 bankruptcy plans.

Lien stripping is a powerful part of Chapter 13 that is 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 that you are able to keep your home under Chapter 13.

Consider a real life San Diego example: A client’s San Diego home is worth $510,000.00, but they owe $535,000 on their 1st mortgage. In this instance, they have no equity or, in other words, are upside down. If they have a 2nd mortgage that has a balance of $60,000.00, the 2nd mortgage is entirely unsecured and can be wiped out under the Chapter 13 bankruptcy plan. If the home is actually worth $540,000.00, then a 2nd mortgage cannot be stripped due to it being secured by $5,000.00.

There is current legislation pending that would allow Bankruptcy Courts to modify your 1st mortgage.

We all know that many San Diego homeowners received 100% of their loans in recent years. With falling home values, many San Diego residents are living the above scenario. Because the percentage of lien stripping is determined by several factors, San Diego bankruptcy lawyers can help. You will want to ensure that your bankruptcy lawyers provide 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, Thompson | Wedeking has helped thousands of individuals in San Diego, Southern California and California get the fresh start and home loan relief they deserve.  Call our office today at 619.615.0767 for more information.

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