Should I Consider a Lien Strip?

Most liens are secured by an asset – in this case, your home – and must be paid when the asset is sold or foreclosed. If you have more than one mortgage or other liens against your house, and if the value of the house is “underwater,” then you should consider a lien strip. Lien stripping is a complicated procedure with many variables, and it is best to consult with experienced bankruptcy attorneys. In Phoenix, Arizona, you might consider The Frutkin Law Firm, PLC.

In Arizona’s volatile housing market many home values have fallen well below the balance of the first mortgage, let alone the second mortgage, and the homeowner is considered to be underwater on the mortgage. When the home is sold or foreclosed there will not be enough proceeds to pay off the first mortgage or any other liens on the property.

In a bankruptcy filing, lien strip means that the court could reclassify a secured lien to an unsecured lien. The status of a lien as secured or unsecured will make a big difference when determining the repayment of the debts during bankruptcy. In Chapter 13 bankruptcy repayment plans, secured debts are paid off first and unsecured debts are delayed. Sometimes unsecured debts are paid off in fractions over time, and may even be paid at less than the outstanding balance. Having a lien stripped in Chapter 13 bankruptcy can amount to a significant difference in the repayment.