The current state of real estate that not good yet caused a lot of foreclosure.Many people lack of funds to address foreclosures. Lien stripping is one of a powerful tool for preserving real estate.It is bankruptcy law procedure code to strip down a lien until it equals the fair market value of the real property encumbered by the lien. This may result in totally removing the lien or it may simply reduce the secured lien with the balance becoming an unsecured claim.
As the Chapter 13 cases are for debtors with regular income to reorganize by paying creditors over a three- to five-year period. This payment does not have to be full payment as long as the debtor has devoted all disposable income to satisfy debts.
Lien stripping in Chapter 13 applies even to consensual liens. It does not happen often because, as the bankruptcy code is currently drafted, it may not be used to reduce liens secured only by the debtor’s principal residence; however, if the lien holder has more than just real property collateral, the lien can be stripped even if it is secured by the residence.
In addition, to these narrow exceptions, there is a case law exception in the 9th Circuit that allows completely unsecured second priority mortgages to be stripped off the property in a Chapter 13.
When a lien is stripped in Chapter 13, the holder of the unsecured balance typically receives partial payment along with other unsecured claims. The debtor can emerge from bankruptcy owing only an amount equal to the property’s value on the petition date.
The procedure for stripping liens is somewhat complicated and potentially costly as it requires an appraisal, a motion to suspend plan payments and a separate lawsuit to strip the lien. The process, though costly, can be worthwhile, however, for people who qualify for this extraordinary relief.
In reaction to the epidemic of recent foreclosures, bills have been proposed in both houses of Congress to amend the bankruptcy code to expand lien stripping so that it can also apply routinely to principal residences.
Consumers who are underwater on their mortgages should seek legal counsel to consider whether they might qualify for lien stripping.
Source from E. Winfield , partner at the law firm of Nordman Cormany Hair & Compton LLP. He is board-certified in business bankruptcy by the American Board of Certification and can be contacted at 485-1000, or through
http://www.nchc.com.