If you are experiencing financial difficulties and thinking about filing for bankruptcy, lien stripping your second mortgage in Chapter 13 bankruptcy can be a great way for you to save your home.
A lien is basically an interest in a property in exchange for money or services. If the owner does not fulfill their legal duty to repay the loan, the individual holding the lien may take lawful possession of the property until the owner has done so. The owner is then prohibited from selling the property prior to the lien being removed. However, if the value of the property is less than your first mortgage, you may qualify for lien stripping your second mortgage when you claim bankruptcy via Chapter 13.
A second mortgage generally reduces your home equity but even if your home may have decreased in value, given time and changes in the housing market, you could build up equity in the long term. By convincing a judge to remove the second mortgage on your home, you may be able to afford the payments on your first mortgage and end up keeping your home. This can be done in cases where the lien exceeds the value of the property since a lien is only secured if there is enough value in the asset to do so. Even your first mortgage may be stripped down to the actual value of the collateral, unless it is the mortgage on your main residence. If you are having trouble paying your mortgage on a building used for business purposes, lien stripping will not be able to help you as it applies only to personal residences.
When the value of your home drops below the amount of your first mortgage, this leaves your second mortgage unsecured and lien stripping your second mortgage in Chapter 13 bankruptcy is then possible. In order to qualify for this course of action, the bankruptcy court will require evidence of the value of the home and will insist that a county property appraisal or third party certified appraisal is conducted.