Lien Avoidance or Lien Stripping

The Lien Stripping program is available for individuals desiring to reorganize their debt using Federal Laws under Title 11 of the United States Code. The mortgage removal can only be used in the context of a reorganization, often referred to as Chapter 13 and a Motion or a Complaint would need to be filed depending on your Judge. If you own a home or rental property with more than one mortgage, you may be able to completely remove the second and subsequent mortgages from your home and county records, thus leaving only the first mortgage.

If you qualify, all mortgages except the first would no longer be secured by your home or rental, and you stop all payments to those creditors while in the Chapter 13. There is nothing the creditor can do, provided you qualfy for a simple three part test:

1. The first mortgage is equal to or higher than the fair market value of the home;

2. You have income or have contributions for your income that are greater than your household expenses; and,

3. Your total unseucred debt is less than $383,175 and your secured debt is less than $1,149,525.

For instance, suppose you have a first mortgage of $400,000 and a second mortgage for $150,000 and the house is worth $390,000. Under this program, the $150,000 gets removed and and you only need to make monthly payments on the first mortgage of $400,000. However, in many cases, the judge will make the Order that the lien will be treated as unsecured; paid pro rata with all unsecured creditors and the lien removed only upon completion and discharge of the Chapter 13 Plan.

For more information on filing for Chapter 7 or Chapter 13, schedule an appointment for a free consultation with Nathan A. Berneman, Esq.