What is Lien Stripping?
Based in Portland, Oregon, Michael D. O’Brien & Associates, P.C. assists clients in bankruptcy proceedings and other matters related to lein stripping and insolvency. As a legal firm devoted to helping our clients obtain the highest level of debt relief, we stay abreast of current trends in bankruptcy law, including ‘lien stripping’ a valuable tool for Chapter 13 debtors. Please see our Chapter 13 page for more information about Chapter 13’s filing procedures and benefits.
Lien stripping allows a Chapter 13 debtor to use the Bankruptcy Code to transform a secured second mortgage or home equity line of credit into an unsecured, extinguishable debt. Because home values have generally decreased in Oregon and across the country, a high percentage of people with a second mortgage may be eligible for lien stripping if they file for Chapter 13 bankruptcy. Generally, if a homeowner has taken out a second mortgage, and thereby owes more than the first mortgage on their home, there is no value to which the second mortgage can attach. Thus, the second mortgage is deemed unsecured debt, and the lien may be stripped.
Not only is the monthly payment on the second mortgage eliminated, but clients emerge from the bankruptcy process without the second mortgage and with no cloud on the title. A lien strip resets the amount of money debtors owe on their homes, and in some cases, reduces total debt by tens of thousands of dollars.
Are You Eligible for Lien Stripping?
If the fair market value of your home is less than the balance due on your first mortgage, we will ask the bankruptcy court to strip the second mortgage during Chapter 13 proceedings. For example, if your home is appraised at $200,000 and you owe $225,000 on your first mortgage and $50,000 on a second mortgage, not only is the first mortgage undersecured, but the second lender has nothing securing their lien. Therefore, the second lender is unsecured because the property has no value left over from the first lien. In this case, the bankruptcy court may remove the second lien and eliminate the debt of $50,000.
While there is no guarantee of what the bankruptcy court will decide, depending on the objective appraisal value of your home, the terms of your original loans, and the details of your Chapter 13 filing, lien stripping is a viable option for debtors with multiple mortgages on their home. If you may be eligible for lien stripping, let Michael D. O’Brien & Associates, P.C. help you take advantage of this important benefit of Chapter 13 bankruptcy.
Seek Knowledgeable, Creative Representation
Our attorneys are at once experienced and progressive in our bankruptcy and insolvency practice, exploring both established and novel methods of achieving debt relief. If you have multiple mortgages on your home and are considering bankruptcy, please contact Michael D. O’Brien & Associates, P.C. to discuss lien stripping under Chapter 13. We offer free initial consultations on most matters.