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What is Lien Stripping

Lien Stripping is a procedure whereby the owner of real estate may eliminate a junior lien, such as a Second Mortgage or Home Equity Line Of Credit (or HELOC, for short) while maintaining his or her ownership in the property.  Under Section 1322 of the Bankruptcy Code, an owner of real estate may eliminate a second mortgage or HELOC if (and only if) the property is worth less than the balance of the first mortgage.  In this way, the property owner is able to “strip” the junior lien from the property and cancel the balance in a Chapter 13 case.

In order to accomplish a lien strip, a client needs to provide us with an appraisal or some other credible document establishing the value of the property, a recent mortgage statement for the first mortgage showing the current balance of the senior loan, a recent second mortgage statement, and a title report showing who holds title to the property.  As counsel for the homeowner, I then file a motion (or request) with the Court for a finding that the property is in fact worth less than the outstanding balance of the first mortgage.  If the Court agrees, it will enter an Order stating that the junior lien cannot be enforced during the Chapter 13 case.  Upon completion of the Chapter 13 case, the Court will enter another Order permanently removing the lien from the property.

During the ongoing housing crisis, we have helped hundreds of clients strip junior liens and made retention of their homes more affordable.  Anyone who has a second mortgage or HELOC and wants to retain their home needs to consider this important and valuable remedy.

For more information, please call our offices at 8313 753 2200 or visit our website at www.AlliottsLaw.com.

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