How it Works

• Eliminating Medical Bills / Debts Through Bankruptcy
• Stop Harassment From Creditors
• IRS Tax Relief in Bankruptcy
• Exemptions – What Can I Keep If I File Bankruptcy?
• Non-Dischargeable Debts
• Repossession and Foreclosure
• Garnishment

• Student Loan
• Reaffirmation Agreement
• Emergency Filing
• ‘Cram Down’ for Auto Loans
• Lien Stripping (2^nd Mortgage / 3^rd Mortgage / HELOC)
• Who is the Trustee

Lien Stripping (2nd Mortgage / 3rd Mortgage / HELOC)

If you’re trying to make a decision which approach to bankruptcy is best for you, the possibility of writing off a second mortgage can be a powerful reason to consider filing Chapter 13.  Chapter 13 carries certain disadvantages for consumer debtors as compared with Chapter 7. The fees are higher, the bankruptcy case continues for years instead of months, and the debtor usually has to pay some creditors who might get nothing if he filed Chapter 7, however there are also good reasons to file Chapter 13.

Chapter 13 lets debtors catch up with delinquent mortgage payments in an orderly way. But with real estate values down an average of 30% over the last few years, an increasingly common reason to file Chapter 13 is to strip off an “underwater” second (or third) mortgage.  One of the benefits of Chapter 13 bankruptcy over Chapter 7 is flexibility. There are just lots of ways and options with your financial situation in a Chapter 13 than in Chapter 7. One of the big ones is stripping an underwater second mortgage:

1. What is lien stripping? Lien stripping is a way of removing an under collateralized portion of a second mortgage on a house in Chapter 13 bankruptcy. If the house has two mortgages, and the second mortgage is fully unsecured, it may be removed or what we called ‘stripped’.  This means that if the value of the house is less the balance of the first mortgage, the second mortgage technically does not have any equity in the house. In this case we may be able to wipe it out or “lien strip’ in Chapter 13.
2. How do I know if my second mortgage is fully unsecured? The first step is to look at your property tax appraised value.  You may look up and verify the fair market value of your house online, such as zillow.com or you can order an appraisal of your house from a HUD certified appraiser.  If the value of your property is less than the value of your first mortgage, your second mortgage is fully unsecured.
3. If I can lien strip, what happens to my second mortgage? A stripped second mortgage is classified as unsecured debt, meaning that it only needs to be paid prorated with your other unsecured debt.  At the end of your plan, if you’ve made all your payments, the court issues an order that removes the second mortgage lien from your house, and you only have one mortgage to deal with. Note that the lien strip order removing the deed of trust lien from your home will be contingent upon you successfully completing your Chapter 13 Plan. As long as you complete your Chapter 13 Plan, the deed of trust lien will be permanently removed from your home.

Lien Stripping Expert

Lien stripping is not for amateurs. There are downsides in the lien stripping process and many lienstrip motions filed by inexperienced lawyers are denied. It truly takes an expert lawyer, who specializes in bankruptcy and has a firm grasp of how lienstrip motions work, to file your lienstrip motion successfully.

At Lozano Law Offices, we are Chapter 13 lien stripping experts. We have extensive experience and success with lien strip motions. We can help you successfully strip off your 2nd mortgage or home equity line of credit through Chapter 13 bankruptcy.  Call us today at (510) 538-7188 to set up a free initial consultation or your may contact us online.