What is Lien Stripping?
The Chapter 13 process might help you save your home from foreclosure in OhioBy Judy Malmon, J.D. | Last updated on January 10, 2023
Use these links to jump to different sections:
Chapter 13 Bankruptcy
The Process of Lien StrippingIn order to be eligible for lien stripping, you will need to get an independent appraisal of your home to determine that it is in fact worth less than the first mortgage. Once that is assessed, your bankruptcy attorney will submit a Chapter 13 Plan of Reorganization to the bankruptcy court for approval, and make a motion to remove junior lienholders from the mortgage. If the judge determines the debts are in fact unsecured, an order will be entered to remove the liens upon completion of the Chapter 13 plan. Beware that you must successfully complete the plan to have these debts removed from your mortgage and discharged. And note that liens may only be stripped in Chapter 13, not Chapter 7 bankruptcy (though it may also be allowed in Chapter 11), and the process may only be applied to loans against your personal residence. In addition, to be stripped, a lien must be entirely unsecured. Even a small amount over the first mortgage in value will eliminate eligibility for stripping. Another option potentially available to you in Chapter 13 bankruptcy relates to the value of other property relative to the debt against it. If you own investment real estate (not your primary residence) or a vehicle with loans that exceed the asset’s value, Chapter 13 allows you to “cram down” the loan balance to the property’s fair market value. If you’d like to further explore your options to restructure your debt, including possibly stripping a second mortgage from your underwater home mortgage, talk to an Ohio bankruptcy law and foreclosure attorney. A bankruptcy lawyer who is proficient at lien stripping work may offer legal advice about the bankruptcy code or your bankruptcy filing. Many law offices and attorneys offer a free consultation to discuss your bankruptcy case. For more information on this area of law, see our bankruptcy overview.
Additional Bankruptcy articles
Find top lawyers with confidence
The Super Lawyers patented selection process is peer influenced and research driven, selecting the top 5% of attorneys to the Super Lawyers lists each year. We know lawyers and make it easy to connect with them.Find a lawyer near you