No doubt Chapter 13 bankruptcy is a powerful tool for homeowners. Debtors with underwater homes may be eligible to completely eliminate a second mortgage with a lien strip. Also, Chapter 13 gives debtors the opportunity to catch up on missed mortgage payments. Filing for bankruptcy even puts an immediate halt to foreclosure proceedings.
Chapter 13 can help people save their homes.
Lien Strip Explained
A lien strip is the stripping away, or elimination, of a second mortgage on a home. This can save people tens of thousands of dollars, or more.
Only certain homes are eligible for a lien strip. The first mortgage attached to the home must be underwater. This means that the house is valued at less than the amount owed on the first mortgage. If the first mortgage is underwater, then the home is eligible for a lien strip.
The lien is stripped only after completion of the Chapter 13 bankruptcy plan. Chapter 13 bankruptcy creates a repayment plan that lasts three to five years, depending on the debtor’s specific situation. All plan payments must be made before the lien strip can be completed.
How A Lien Strip Operates
Let’s look at an example to better understand how a lien strip operates. Consider the following facts:
- Current fair market value of the home: $150,000
- First mortgage, amount owed: $200,000
- Second mortgage, amount owed: $50,000
Under these facts the home is considered underwater, because the current value of the home is $50,000 less than the amount owed on the first mortgage. The second mortgage would be eligible for a lien strip. In this case, if the homeowner completed a Chapter 13 bankruptcy, she could erase that $50,000 second mortgage debt.
Additional Benefits To Homeowners
There are additional benefits to homeowners in Chapter 13 bankruptcy. Not only can Chapter 13 lien strip a second mortgage, it also:
- Allows homeowners to catch up on missed mortgage payments.
- Stops foreclosure proceedings as soon as the case is filed.
Missing a mortgage payment is frightening. It leaves the homeowner wondering how they’re going to catch up while still making the regularly scheduled payments. Chapter 13 bankruptcy allows homeowners to pay mortgage arrears in their plan payments. It also stops penalty fees from accruing while the missed mortgage payments are being paid.
Filing for bankruptcy also puts an immediate stop to any foreclosure proceedings. In fact, filing for bankruptcy puts an immediate stop to all collection action, including collection calls! Learn more about this in our article The Power of the Automatic Stay and How It Helps You.
Chapter 13 Bankruptcy Can Help You Save Your Home
Contact us today to explore how Chapter 13 bankruptcy can help you save your home. Call us (912) 351-9000 to schedule your free consultation. The Law Offices of Barbara B. Braziel proudly serves all of Savannah, GA and the surrounding counties including Chatham County, Effingham County, Bulloch County, Bryan County, Liberty County, Long County.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.