What is Lien Stripping?
In Chapter 13 bankruptcy proceedings, lien stripping is the process in which all of your junior liens, such as second or third mortgages, are eliminated. When bankruptcy is filed in these situations, the second or third mortgages will be considered “wholly unsecured” since these lenders will not receive any money. This allows these liens to be stripped during Chapter 13 bankruptcy.
Who Can Benefit From Lien Stripping?
Stripped liens are treated the same as all other unsecured debts during Chapter 13 bankruptcy in that they are usually discharged, or wiped out, and you will have to pay little to nothing on them. Once the liens have been discharged, the lender will have to remove its lien from your home. You are likely to benefit from lien stripping if any of the following apply:
- You have taken out more than one mortgage on your home
- The value of your home has dropped since you took out the first mortgage
- An appraiser has confirmed the drop in value and is willing to testify in court
Chapter 13 bankruptcy often means that banks and mortgage companies who provided loans against your home will not get their money back, so it is likely that these organizations will try to fight the removal of liens. This is why you need qualified professionals on your side to give you the best chance at a successful bankruptcy application.
Contact a Cedar Rapid Bankruptcy Lawyer
If you are facing the daunting process of filing for Chapter 13 bankruptcy, contact the Cedar Rapids bankruptcy attorneys at Hong Law, PLC. Our experienced legal professionals can draw upon their extensive knowledge base to offer excellent advice and guidance to make the process as easy and effective for you as possible. Call our Cedar Rapids office today at (319) 294-5853 to learn more about how we can help you move on to a better financial future.
Coralville, IA 52241
Phone: (319) 354-1804
Map to our Coralville Office