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How lien stripping could possibly save your home

Even though the economy is steadily improving and the stock market is reaching new heights, there are still many homeowners who are struggling to get by. Part of this reason may be due to aggressive attempts to repay debt, or severe illnesses or injuries have affected a person’s ability to make a living and pay personal obligations.

In these times, homeowners may make tough choices about which obligations to pay. This may mean that a second mortgage may go unpaid. Despite challenging financial situations, homeowners can be secure in knowing that a Chapter 13 bankruptcy can help save their home. Additionally, a Chapter 13 could work to strip a second mortgage. 

This process, known as “lien stripping” may work to eliminate a pesky second mortgage. Essentially, debt is classified into two categories (secured debt and unsecured debt). Unsecured debt is not attached to a specific asset (such as a car or home), while secured debt is anchored by a piece of property that serves as collateral to a loan. Second mortgages start out by being secured by the home, but as the home loses value, the second could be considered unsecured debt.

If this is the case, and the home is worth less than the value of the first mortgage, a troubled homeowner could strip the second mortgage through a Chapter 13 bankruptcy. This could free up cash to pay debt and make inroads towards financial security. Moreover, it could lead to a homeowner having some equity in the home after the plan is completed.

If you have additional questions about lien stripping through a Chapter 13 bankruptcy, an experienced attorney can help.

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Goble & Yow, PLLC
215 Franklin Street
Clarksville, TN 37040

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