Mortgage Lien Stripping

Chapter 13 BANKRUPTCY - Strip that 2nd mortgage – Lien Stripping Lawyers

You may need a Lien Stripping Attorney? If you own real estate with a second mortgage you may be able to strip that lien in a Chapter 13 Bankruptcy Case. This is becoming more common these days due to falling real estate values.

With real estate declining as much as it has, many second mortgages we see beyond the first are wholly unsecured. Meaning the value of the real estate is less than what is owed for the first mortgage and therefore the second mortgage lien is not attached to any equity.

For example: If you purchased a home at the top of the market for $300,000 by obtaining a first mortgage loan for $240,000 and a second mortgage loan for $60,000. (A very common scenario referred to as an 80/20 loan) and now the house has dropped to $235,000, since the second mortgage of $60,000 is not secured by the real estate anymore in a Chapter 13, you can “avoid” the “wholly secured” lien on your real estate provided it is your personal residence. If you were to avoid the lien, then you would now have a house valued at $235,000 with only a first mortgage for $240,000. The $60,000 second was “stripped” from the property and is treated as an unsecured creditor in the Chapter 13 case no different than an unsecured credit card. When you then emerge from bankruptcy after your discharge you then have only one mortgage lien on you house and you owe nothing to the second mortgage.

At the law firm of Newland & Newland, LLP, we have been successful in stripping second mortgage liens for clients. Not all lawyers can properly handle “lien stripping", however, we do. Please contact Stephen S. Newland if you want to see if loan stripping is an option for you.