WHAT ARE THE REQUIREMENTS FOR LIEN STRIPPING?
WHAT ARE THE REQUIREMENTS FOR LIEN STRIPPING
Lien stripping is applicable in Chapter 13 bankruptcy throughout the United States. Also, the value of your house must be less than your mortgage and you need to have multiple mortgages or lines of credit on the house.
Suppose you have a house with a mortgage of $200,000 and an equity line of credit of $25,000 when the real estate market plummets in your area, causing the market value of your house to drop below the cost of your mortgage to $190,000. You soon realize that you cannot make payments on the house and then file for Chapter 13 bankruptcy. In this case, you will have met the requirements for lien stripping. Types of Liens Eligible to be Stripped During Bankruptcy
In Chapter 13 bankruptcy, voluntary liens, such as mortgages and security liens, may be voided if they are junior liens, and the balance owed to the senior lienholder exceeds the current value of the property to which they are attached. Chapter 13 bankruptcy is commonly used to strip property liens such as lines of credit, second mortgage or third mortgage because these liens more frequently are in essence unsecured, due to the falling values of real property, it is common for the value of the property to be less than the balance owed to the senior lienholder.
In addition to voluntary liens, judgment liens can also be stripped, and/or if the judgment lien impairs an exemption you would otherwise be entitled to, the lien can be avoided.
Non purchase money liens on vehicles and other property may also be stripped or avoided during the reorganization process in Chapter 13 bankruptcy but only in some circumstances. To understand whether your liens are able to be stripped when you file for Chapter 13 bankruptcy, we encourage you to meet with our attorneys. Every financial situation is unique and requires an individual assessment to determine how your bankruptcy action will proceed.
CALL US AT OUR 24 HOUR CUSTOMER SERVICE HOTLINE: 1-800-562-0004
Our Business Hours are:
Mon – Friday from 10:00am to 6:00pm Saturday from 10:00am – 2:00pm
When you have legal business questions, Attorney Omar Zambrano is here to help!
Contact us today to schedule your FREE CONSULTATION.