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Declaring bankruptcy is one of the most effective ways to eliminate insurmountable debt and regain financial freedom. While it’s typically used to discharge unsecured debt incurred from credit cards and personal loans, it’s possible to relieve the burden of mortgage liens as well. Those who file for a Chapter 13 bankruptcy and go through a process known as lien stripping may have the opportunity to get rid of junior mortgages and keep their house.

The Lien Stripping Process in Chapter 13 Bankruptcy

How to Strip a Lien

chapter 13 bankruptcyThe process of lien stripping begins with filing a motion in conjunction with a Chapter 13 bankruptcy to request that the junior mortgage change from a secured debt to an unsecured debt. Your mortgage will then be eligible to have its remaining balance wiped once the bankruptcy’s repayment plan is complete. A successful motion will end up saving homeowners quite a bit of money, although they will still be responsible for paying off their original mortgage.

What Qualifies a Mortgage for Lien Stripping?

To qualify for lien stripping, a homeowner must be able to show that the value of their home is less than what they owe. In addition, they have to stay current on the repayment plan organized through their Chapter 13 bankruptcy. Failure to make a payment will result in case dismissal and leave the junior mortgage in place. Once a discharge has been granted, the lender will be required to remove their lien from the property, and you’ll no longer feel like you’re immersed in mortgage payments.

 

Lien stripping has great benefits, but can be a complicated process, so seek out the professional assistance of Greg Dunn, Bankruptcy and Debt Relief Attorney in Honolulu, HI. He has helped thousands of homeowners avoid foreclosure and achieve debt relief. Contact his office at (808) 524-4529 for an appointment to evaluate your financial situation, or visit him online for more information on Chapter 13 bankruptcy. 

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