What Is A Lien Strip?

Depending on your particular situation, a Chapter 13 Bankruptcy proceeding may afford a unique opportunity. Provided that you are a homeowner with an “underwater” property (if the fair market value of your home is worth less than the outstanding primary loan balance), you may have the ability to remove a second mortgage or a home equity loan. This is called a lien strip.

Removing secured debt from your property by way of a lien strip is typically done through a adversary proceeding in the Bankruptcy Court. If the homeowner is successful the proceeding, the court will order that the additional mortgage or home equity loan be removed from the property.

Upon removal, the debt will be treated like any other unsecured debt in the Chapter 13 bankruptcy. Depending on your Chapter 13 plan, a percentage of unsecured gets paid over life of your plan. This depends upon your budget and various other factors. Secured debt must be paid back in full, and you will be in a better position to do so after your Chapter 13 plan is complete and the remaining unsecured debt is discharged.

If you have any questions about lien strips, Chapter 13 Bankruptcy, or foreclosure defense please call the Law Offices of David I. Pankin, P.C., at 888-529-9600 or by email by filling out our contact form.

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