Chapter 13 Lien Stripping: Stripping the Additional Mortgages from Your Home
When filing for Chapter 13 petitioners have the option of “lien stripping.” The drastic drop in the value of homes in many regions throughout the nation in recent years has left many homeowners “upside down” in their homes. This well known saying means that the homeowner owes far more on the house than it is worth in the current market. Chapter 13 lien stripping enables these homeowners to “strip off” the second and even third mortgages that are typically at the base of the problem. Lien stripping is a special power of Chapter 13 only in times when the housing market is flat or declining. When property values rise to healthy levels, the power will either be diminished or eliminated entirely. So many are urging consumers that are “upside down” in their homes to take advantage of it while they still can.
When taking advantage of Chapter 13’s lien stripping ability, the second and third mortgage can be reclassified from secured to unsecured debt. This is important because unsecured debt is eligible to become a part of the Chapter 13 repayment plan. It is important to acknowledge that failure to complete the repayment plan as agreed upon within the 3-5 year time period specified could negate the lien stripping benefits and leave you with your mortgage or lien still in effect.
Every situation is different and the details of your case will need to be considered to appropriately apply the lien stripping power to your Chapter 13 repayment plan agreement. Contact Westgate Law for an experienced lien stripping lawyer with extensive experience in bankruptcy law.