Removing Second Mortgages Though Lien Stripping

Before we begin to give you additional information on this topic, take a moment to think about how much you already know.

In the grant economic period many individuals are living with financial decisions causing them to organize assets, such as houses, automobiles and boats, whose morals have plummeted. Individuals are living in properties whose morals have dropped far below the mortgages or heavy cars, which are valued at a third of the loans. Those individuals with financial difficulties are looking for assistance through the bankruptcy courts in an endeavor to get out from underneath all of the debts and liens acquired, which now greatly exceed their existing assets.

There are two types of liens, which can be friendly to an individual's land or assets. The first is a voluntary lien, which is chiefly a situation where you have settled to use the asset as collateral for a debt, i.e. mortgages and auto loans. A non-voluntary lien is one that a creditor imposes on you and that gives them the right to drive you to sell the asset so that they can be paid, for example: judgments against you or tax liens. These liens are either secured or unsecured as to the asset they are friendly to.

The most ordinary broadcast for an individual presently is the situation where a homeowner who has a first and second mortgage on a major residence is facing bankruptcy and wondering if they have the ability to collect the family home. As real estate markets drop and the carnival market morals of the homes drop, homeowners are left with mortgages that far exceed the existing carnival market value of their homes. There is a method which could be of help to many in this situation and it is called "lien stripping".

Keep reading further to learn how this topic can benefit you, as the rest of this article will supply you will the needed information.

"Lien stripping" refers to the method of tumbling a secured claim to the value of the underlying collateral. It uses the pooled look of 11 U.S.C.A.  506(a) and 11 U.S.C.A.  506(d) to diverge the lien into secured and unsecured. The secured lien is allowable in the amount up to the carnival market value of the land at the time of the stripping. The balance of the lien, which exceeds the carnival market value of the land, is now deemed unsecured.

Liens can be stripped off of the cheat's assets in Chapter 11 or Chapter 13 when there is not enough equity in the assets. divide 506(a) and 506(d) of the Bankruptcy program acknowledges that a lien is only a secured claim to the coverage there is value in the asset to which it attaches. To the coverage that the claim exceeds the value of the collateral, that portion of the lien is now unsecured. The most ordinary application of lien stripping is the decrease of car loan liens to the grant value of the vehicle however it is existingly used more regularly with home mortgages in bankruptcy situations. Lien stripping with car loans has been narrow to vehicles purchased over 910 living.

The Bankruptcy program does okay a bankruptcy graph to "adjust the rights of organizeers of secured claims, other than a claim secured only by a safety interest in real land that is the cheat's principal residence". divide 1322 (b)(2). This split provides protection to the organizeer of a claim secured only by a lien on the cheat's principal residence by prohibiting any modification of the language, however the broadcast arose as to if this split excluded "lien stripping" of undersecured residential mortgages in the face of Bankruptcy program split 506 which appears to okay bifurcation of undersecured mortgages and voiding of unsecured portions of the mortgage lien. At slightest two bankruptcy court judges meeting in Massachusetts have okayted such bifurcations.

In any result, there is an immunity as to the lien on a principal residence lien and that is if there is a second or third lien on the same land. In this occasion those liens, lien stripping is offered to render them perfectly unsecured if the first mortgage balance equals or exceeds the value of the personal residence. The immunity is only if there are two plain mortgages on the land, not a refinancing situation. It should also be prominent that the limitation of lien stripping of first mortgages only direct to personal residences, it will be allowable for a mortgage on a shop used for business or renting.

As always, all situations virtual to a plan for bankruptcy and lien stripping should be discussed in assign with a bankruptcy attorney to understand all your avenues open to you.

This article is the perfect way to gain the information that you need to fully appreciate the complexity of this subject.

Learn More:Author: Jeff Raford
http://jeffraford-financebankruptcy.blogspot.com/