Jan 26 2010
The Advantages of Stripping Away Your Second Mortgage in Bankruptcy
In Bankruptcy cases, specifically Chapter 11 and Chapter 13, lienstripping is an effective tool in reducing the payments made to creditors. In Chapter 13, the debtors reorganize their debts into a repayment plan whereas Chapter 11 is for businesses and individuals whose debts exceed the limits in Chapter 13.
One of the biggest advantages of filing and completing a Chapter 13 bankruptcy is that it provides you with the option of filing a separate motion to remove all junior liens against your real property. This process is called a "lien strip." A lien strip is a legal remedy that provides that, if the value of your home is below the amount owed on your first mortgage, you may be able to strip the security from your second and/or third mortgages. This means that, upon discharge of your Chapter 13 bankruptcy, you will no longer have the junior liens on your home, and the property will vest in you free and clear of the former junior liens.
