Chapter 13 bankruptcy has a process called ‘lien stripping’ that may allow certain homeowners to get rid of a second mortgage or home equity line of credit. Lien stripping requires a separate motion with the court. The basic process is as follows, which should be completed with the help of your Raleigh, NC bankruptcy lawyer:
- File Chapter 13 bankruptcy.
- File a motion or other written legal request to explain why the second mortgage from your house should be removed.
- Give creditors proper notice.
- Once the motion is approved, prepare and submit the order to be signed by the judge.
An approved ‘lien stripping’ order directs your second mortgage creditor to strip their claim from your home and the mortgage company must leave you alone until your case is discharged. As you can imagine, this can provide some great relief to a debt problem.
To increase your chances of getting rid of your second mortgage, it helps if you fulfill the following criteria:
- You have two mortgages and want to keep your home.
- Your home’s value is equal to or less than the first mortgage.
- You have enough monthly income to make the first mortgage payment and live comfortably.
When you file for Chapter 13 bankruptcy, you may immediately gain the benefit of not having to pay your second mortgage through a process called Lien Stripping. However, this doesn’t mean that the second mortgage lien is removed from your house. This can only happen when you complete the payment plan assigned to you by the judge.
If you complete the plan, any amount left on the mortgage is wiped out. However, if your case is dismissed before you complete your bankruptcy plan, your second mortgage remains in place.
Generally speaking, the judge cannot strip the second mortgage on your house if your property still has equity. That’s why you can only remove the second mortgage if the first mortgage is equal to or greater than your home’s full worth.
Lien stripping is one of Chapter 13 bankruptcy’s more complicated aspects. Thus, you should consider it only with the help of a really good bankruptcy attorney in Raleigh, such as those from Weik Law Office, Bankruptcy Attorneys. If you have a second mortgage and want to explore the feasibility of lien stripping, get in touch with these legal professionals when you can.
Can Chapter 13 Help Me Get Rid of Second Mortgage?, FoxBusiness.com
Getting Rid of Second Mortgages in Chapter 13 Bankruptcy, Nolo.com