Sacramento Bankruptcy Attorney Discusses Chapter 13 Bankruptcy
Sacramento Bankruptcy Attorney Discusses Chapter 13 Bankruptcy
When faced with a Chapter 11 bankruptcy or a Chapter 13 bankruptcy there are some questions that have to do with liens. Liens can be stripped off of the debtor's assets in Chapter 11 or Chapter 13 when there is not enough equity in the asset. This is determined after deducting senior liens from the property's current market value, to secure the unsecured in whole or in part, where the lien exceeds the value of the debtor's property. Section 506 of the Bankruptcy Code acknowledges that a lien is only a secured claim to the extent there is value in the asset to which it attaches. To the extent that the claim exceeds the value of the collateral, that portion of the claim is unsecured. In Chapter 11 or Chapter 13, even voluntary liens, such as mortgages and security interests, can be stripped down to the value of the collateral, with the exception of voluntary liens secured only by the debtor's residence.
Lien stripping happens a lot with vehicles where there will be a reduction of car loan liens to the present value of the car. Thus a lender holding a $12,000 claim secured by a car now worth $10,000 has a secured claim of $10,000 and a unsecured claim for $2,000. Two thousand dollars of the lien may be stripped off the car in a reorganization. The plan must provide for payment in full of the secured portion of the debt; the unsecured portion can be paid little or nothing along with other unsecured claims.
If you have a question regarding Bankruptcy please contact Sagaria Law at 1-800-941-6730 for a free consultation or visit us at www.sagarialaw.com. Our team of Bankruptcy Attorneys can assist you with all aspects of your case. We have attorneys in San Mateo, Monterey, Fremont, Salinas, Sacramento and San Jose.
