San Jose Bankruptcy Attorney discusses Lien Stripping
San Jose Bankruptcy Attorney discusses Lien Stripping in a Chapter 11 bankruptcy or a Chapter 13 bankruptcy
Debtors filing for Chapter 11 bankruptcy or Chapter 13 bankruptcy protection have the option to avoid junior secured liens on their property if their property is underwater. For example, if a debtor’s home has a first mortgage of $100,000 and a second mortgage of $30,000 but the property is only worth $80,000, there is no equity in the home to secure the lender’s second mortgage. Bankruptcy law permits debtors to “strip off or lien strip” the $30,000 second mortgage and convert it to unsecured debt. Once the loan has been “stripped” the debtor’s property will solely be secured by its first mortgage of $100,000.
The Obama Administration proposed a plan that would give bankruptcy courts the authority to “cram down” a debtor’s first mortgage to the fair market value of the property. In the example above, since the property is only worth $80,000, the first mortgage would “cram down” from $100,000 to $80,000 to reflect the property’s current value. That proposed legislation is currently stalled in Congress, but debtors remain hopeful for future relief.
Debtors who have already filed for bankruptcy protection and had their cases discharged are not precluded from this benefit. A debtor can petition the court to reopen their bankruptcy case in order to exercise their right to bring a motion to avoid a lien.
If you have a question regarding Bankruptcy please contact us at 1-800-941-6730 or visit www.bkanswers.com and we can connect you with one of our experienced Bankruptcy Attorneys. After you have spoken with one of our bankruptcy attorneys we can schedule you a free face to face appointment in our office location nearest you. Our team of Bankruptcy Lawyers can assist you with all aspects of your case. If you are have questions about filing a chapter 7 bankruptcy, a chapter 11 bankruptcy, a chapter 13 bankruptcy, lien stripping, cram down, stopping a foreclosure or wage garnishment, discharging debt, etc. we can help! We have bankruptcy attorneys located throughout California who can assist your needs.
