Miami Lien Stripping Lawyer
If you are in the process of filing for bankruptcy, you may be concerned about your home. One method that has come into use since the recession is called lien stripping, and it is usable when a secured debt is valued much higher than the asset is now worth. While not usable in all bankruptcy situations, you may want to investigate the possibility of lien stripping being something to try in your individual case.
Bankruptcy and Loans
The first thing one should be aware of is that lien stripping is only available to those filing for Chapter 13 in most cases, though isolated cases do exist which permitted the practice in Chapter 7 filings until a 2015 U.S. Supreme Court ruling ended it. Chapter 13 is the type of bankruptcy in which debts are reorganized, rather than liquidated. A plan is put forth and signed off on by the person’s creditors, many of whom may accept less than the loan, but most lenders will consent to a Chapter 13 because they will at least receive something.
Very often, in an effort to get out of debt, a person will put multiple mortgages on their home or any other significant asset such as a boat or an automobile. However, this does not help in many situations – in reality, most of the time, the person is only acquiring more debt they cannot repay, given interest rates and any assorted fees that they will be owing on top of the capital. This will generally lead to a bankruptcy filing.
How To Lien Strip
Lien stripping can only occur when an asset has multiple liens or mortgages on it, and thus by nature those debts are ostensibly secured. When the person files for Chapter 13 bankruptcy, a bankruptcy trustee will examine their finances and look for a way to arrange debts so that they can be paid off via reorganization. However, if an asset is underwater on a first lien already, there will be no equity left over to pay off a second or third lien. Thus, these loans, despite being ostensibly secured, become junior loans because there is no equity left to keep them secured.
The crux of the matter is that junior liens can be stripped off a mortgage with no real consequence, given that any remaining balance on these now-unsecured loans will likely be wiped clean upon your bankruptcy discharge. Unsecured loans are the lowest priority in Chapters 7 and 13 bankruptcy filings, and as such they are almost always wiped away simply because no assets remain with which to satisfy them.
Contact An Experienced Miami Lien Stripping Lawyer
The process of lien stripping can quite complex, and even if you feel confident in your ability to navigate a bankruptcy, introducing lien stripping into the equation usually calls for a knowledgeable attorney to assist. The Miami lien stripping lawyers at Nowack & Olson, PLLC have experience in these types of cases and are happy to put it to work for you. Call us today to set up a free consultation.