Lien Stripping

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Lien Stripping
A Guide to Lien Stripping
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What is a Lien?
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A lien is a security interest in a property or
asset in order to ensure that a debt is paid
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When you take a mortgage, the lender puts a lien
on the home so the home guarantees the mortgage
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When you borrow money to buy a car, the lender
who issued the car loan puts a lien on the
vehicle and has a security interest in the car
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Lien and Secured Debt
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The lender who has a lien on property could force
the sale of property or have a claim on the
proceeds when sale occurs
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The lender is protected because the lender can
be repaid from the sale of the asset
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The debt is called secured debt and usually the
interest rates on secured debt are lower since
there is less risk to the lender
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What is Lien Stripping?
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LIEN STRIPPING removes the lien from the property
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For example, the mortgage lender would no longer
have a claim to your home
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When a lien is stripped from the property or
asset, the asset is no longer collateral for the
loan
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The debt becomes unsecured debt, just like
credit card or personal loan debt since there is
no asset for the lender to take if you do not pay
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Lien Stripping Chapter 13 Bankruptcy
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The process of lien stripping can be a part of a
Chapter 13 bankruptcy filing
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If the lien is stripped from a mortgage loan and
the debt is reclassified as unsecured debt, the
money owed can become part of a chapter 13
bankruptcy repayment plan
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A Chapter 13 repayment plan restructures debts
and allows you to pay back only a portion of
what you owe
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Your payments are made according to a 3-5 year
plan that creditors must approve
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Payments are usually set based on your income and
financial obligations
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How Does Lien Stripping Help You?
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When a lien is stripped and the mortgage or other
debt is classified as unsecured and included in
a chapter 13 repayment plan, you may not have
to pay the full value back
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Any remaining balance after the payment plan has
successfully been completed is forgiven
(discharged)
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Lien stripping can allow you to keep a home or
other assets acting as collateral, when you might
otherwise lose this property if you couldnt get
and stay current on full payments
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When is Lien Stripping Possible?
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Lien stripping is not always possible in a
bankruptcy proceeding
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In general, lien stripping is only an option if
you owe so much on your first mortgage that there
is not really any actual collateral
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If your house is worth 100,000 and you owe
130,000 on your first mortgage, then any second
mortgage you have is not actually secured
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If the second mortgage lender had to foreclose
due to nonpayment, the full amount of money
would go to the lender holding the first mortgage
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Lien Stripping Non-Primary Mortgages
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When a second mortgage lender doesnt actually
have any security interest since foreclosure
wouldnt generate money, lien stripping is an
option for debtors in chapter 13 bankruptcy
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Lien stripping is an option not just with second
mortgages but also in other situations where you
have a supposedly SECURED debt but there is a
prior claim from another lender on the asset
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Lien stripping simply reclassifies a debt
without a real security interest in property or
assets as unsecured debt
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Pursuing Lien Stripping In Your Case
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If you intend to try to have a lien stripped from
your mortgage or secured debt during a bankruptcy
filing, it is important to understand how to make
that request of the trustee and court
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You should have a qualified experienced attorney
on your side to assist you with having a lien
stripped so you can protect your assets
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Learn More About Lien Stripping and How It Can
Help You Save Your Home from Foreclosure
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www.Lee-Legal.com
Bankruptcy Lawyer in Washington, DC, Maryland and
Virginia
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