Not long ago there was a time when loan modifications were a very popular topic of interest and conversation for homeowners. Unfortunately, after thousands of scams and rejected loan modification applications, people have now turned their interest to “lien stripping.” Lien stripping, also referred to as a “cram down”, occurs during a chapter 11 or 13 bankruptcy when when a judge removes the second mortgage during bankruptcy proceedings. This can happen if the loan is secured by other collateral that is part of the bankruptcy filing or if the home is not the debtor’s principal residence or even if the payment structure on the second mortgage falls heavily during the bankruptcy filing period itself.

To qualify for lien stripping, you must be upside down on your first mortgage. This means that the value of your home is lower than the balance of your first mortgage. To prove this, you must get an appraisal which shows that you are not only upside down on the first mortgage, but that the second mortgage is undersecured; thereby qualifying you for modification through bankruptcy.

At The Law Office of Hasti Daneshvar, we can draft a chapter 13 plan to be filed with the court. Once we file your plan, we will file what is referred to as an adversary proceeding, which is a lawsuit filed in the bankruptcy court. Your second mortgage lender will be the defendant. Attached as evidence to the lawsuit will be your appraisal demonstrating that you are upside down on your home. In most cases, a good appraisal will prevent the lender from fighting the mortgage modification since lenders are well aware of both state law and the fact that it would just be a waste of attorney’s fees.

With a successful chapter 13 plan, the lien of your second mortgage lender will be stripped from your home. The second mortgage will then be paid as an unsecured debt through the chapter 13 plan, often at pennies on the dollar. Ultimately, lien stripping in chapter 13 results in much lower mortgage payments and freedom from foreclosure. Call us now so we can help you save your home!