Lien Stripping

Lien stripping is a process in Chapter 13 bankruptcy that allows you to eliminate junior liens on your real estate. Through lien stripping, a second and even third mortgage can be discharged and the lien removed from your property to make it easier to build equity, reduce your debt load, and help you save your property.

When Can I Strip a Lien?

Lien stripping usually applies to real estate with a second or third mortgage. Which liens can ultimately be stripped from your property depends on many factors such as:

• The type of lien
• Chapter of bankruptcy you file
• Value of the asset to which the lien is attached

There are a few types of liens. Voluntary liens are those you agreed to, such as mortgages and home equity lines of credit. Judicial liens are those that arise from a judgment in a lawsuit. Statutory liens are the result of a statute in the law, such as a tax lien or property tax lien.
In Chapter 7, only judicial liens may be stripped from property if they impair an exemption the debtor is entitled to. Chapter 13 allows you to reduce any lien to the value of the collateral.
Lien stripping is typically used to get rid of liens on a home, but it can also be used to strip liens on a vehicle if it meets certain requirements.

Lien Stripping Second & Third Mortgages

With lien stripping, you can remove completely unsecured liens on property. When your home already has a primary mortgage, it is considered the first priority against any other liens that come later. Priority is typically determined by the date the lien is recorded with the county. If your lender forecloses on the property, the first lender will be paid with the proceeds of the sale before any secondary lien holders get any money.
If you owe more on the first mortgage than the value of the home, the second lender (and any other lien holders) do not stand to receive anything in a foreclosure because there will be nothing left. Because these secondary lenders will not receive money if the home is sold, second and third mortgages are then considered wholly unsecured and they may be stripped in a Chapter 13 bankruptcy.

Contact a Las Vegas Bankruptcy Lien Stripping Lawyer

If you are struggling with substantial debt but you are worried about losing your home or vehicle, Chapter 13 bankruptcy gives you a valuable tool: lien stripping. Lien stripping can help you retain your property and get rid of liens that represent a financial burden. A Nevada bankruptcy attorney can help you understand how lien stripping works and how it would apply in your case. Contact Las Vegas BK today for a free consultation to discuss your case.