What Is Lien Stripping?
Owning a home is a source of pride, and for most people getting into debt through a mortgage to afford their dream home is worth every penny.
However, the economy is becoming increasingly challenging for many people. After using the first mortgage to buy a home, you might be forced to take a second mortgage against the house to survive your financial difficulties.
Things might even get so bad that you have to take out yet another loan, using your home as security. You might wake up one morning to find that you’re unable to pay your debts, and you’re also in danger of losing your home to foreclosure.
If this scenario sounds familiar, you might benefit from lien stripping.
Lien stripping is a process under Chapter 13 bankruptcy that effectively removes liens categorized as junior liens from your property. The effect of a successful lien stripping is that all subsequent mortgages, other than the primary mortgage, are converted to unsecured debts. Those debts would no longer attach to your home. You can then focus on paying up all other debts under your Chapter 13 bankruptcy repayment plan without fear of homelessness.
How Lien Stripping Works
The first thing to note about how lien stripping works is that it is not an independent procedure. Rather it is usually tied to a Chapter 13 bankruptcy under the bankruptcy code.
Chapter 13 bankruptcy does not wipe away all your debt. Instead, you are allowed to repay your debts more conveniently. This is unlike the procedure in Chapter 7 bankruptcy, where you’re likely to get outright debt relief without having to make any repayment, although some of your assets might be forfeited.
The above distinction is important because you cannot use lien stripping in a Chapter 7 bankruptcy. The process is restricted to Chapter 13 bankruptcies alone.
Therefore if you have more than one mortgage, you could apply for Chapter 13 bankruptcy so that you can strip other mortgages and deal only with the primary mortgage. This will lessen your liability and help preserve your assets.
Lien stripping can only be applied to junior liens. Junior liens refer to subsequent mortgages that exceed the market value of the property used as security.
If you are a homeowner in Atlanta or any other part of Georgia and have more than one mortgage, you can have the second or third mortgage removed through lien stripping.
However, the court can only strip junior liens if you owe more than your home is worth. For instance, if your home is worth $15 000 and you have several mortgages that add up to a total mortgage debt of $20 000, the subsequent mortgages that make up the $5000 difference may be classified as junior liens that can be stripped.
The value of your property is thus an important factor in determining if you qualify for lien stripping. You might need to contact a valuation professional to ascertain the actual market value of your property.
Effects of Lien Stripping
The more mortgages you have, the lesser your home or property value. So if you’re behind on your mortgage payments, you can apply to strip the junior liens on your property ( up to the fourth mortgage) as you petition for bankruptcy.
However, lien stripping does not automatically write off your debts. Instead, it converts junior liens to unsecured loans by order of the bankruptcy court. This happens because the value of your property is not enough to cover the junior liens as security after taking care of the preceding mortgages or debts.
In the event of a foreclosure, the primary mortgage has priority and is usually repaid first before all others. There might not be anything left to pay off the junior liens. Effectively lien stripping removes a junior lien or mortgage from the line of priority and turns it into unsecured debt.
Unsecured debts are usually taken care of under a Chapter 13 repayment plan. However, you might only need to pay a reduced amount.
How an Atlanta Lien Stripping Attorney Can Help
A bankruptcy lien stripping attorney may sound like another expense, especially since you’re already in debt. But you need proper legal counsel to help you get the reprieve you seek and guide you through the lien stripping process.
Here are some specific ways a lien stripping attorney can help you:
- Your attorney can assess the facts surrounding your case and help you determine an ideal course of action and the form of bankruptcy from which you’re likely to get the most benefits.
- Your bankruptcy lawyers can also help you legally stop creditor harassment.
- Your attorney would also represent you in bankruptcy court, using their skill and knowledge to protect your interests. Representing yourself during bankruptcy proceedings as a non-lawyer might leave you open to mistakes that could cost you your assets.
- Additionally, your lien stripping attorney can help you identify any debts that have been affected by the statute of limitations to reduce your liability where possible.
Filing for a Chapter 13 bankruptcy and lien stripping is not easy because although it allows you to repay your debts and preserve your assets, it might negatively affect your credit score. However, bankruptcy may be the only thing standing between you and your creditors, who are ready to repossess your home and any other tangible property as payment for what you owe.
This is why you need an experienced lien stripping lawyer or law firm to guide you and act for you throughout the process.
Let Us Help You
At Cherney Law Firm, we understand that filing for bankruptcy is a huge decision, and you need all the support and professional help you can get. We have extensive experience with lien-stripping and Chapter 13 bankruptcy cases. We offer you a personalized experience and quality representation as you seek a fresh financial start.
We can assess your case once you schedule your free consultation with us.
So, if you’re a mortgage holder going through financial difficulties, you can contact us immediately, and we can help you figure out possible solutions.
Frequently Asked Questions
How Do I Remove a Lien on a House?
To remove a lien from a house, you need to satisfy the debt, especially when you used the loan to purchase the house. After completing the payment, your secured creditor would sign a release of lien form, which serves as evidence that you have fully paid off the debt.
What Happens When a Lien Expires?
Liens expire when the loan under consideration remains unpaid within the time prescribed by the statute of limitations on debt. This is usually ten years (for debts) in Missouri. When a lien expires, it is no longer valid and can no longer be enforced by secured creditors to obtain payment.
How Long Will a Chapter 13 Bankruptcy Delay Foreclosure?
Chapter 13 bankruptcy can offer some bankruptcy relief for homeowners or mortgage holders. It gives them some time, usually between three to five years, to resolve any mortgage default without fear of foreclosure.
However, it is crucial to stick to your repayment plan and complete all payments within the stipulated time or risk losing your assets.