Contested Lien Strip Victory – Second Mortgage Eliminated
Many people are unaware that in bankruptcy you may complete eliminate second mortgages and equity lines of credit on their home or investment property and keep your home through bankruptcy.
This is called a lien strip. In order to strip the second mortgage, your home must be worth less than the outstanding balance of your home. Here at the Kovacs Law Office we routinely help people through bankruptcy and eliminate second mortgages. Typically the lien strip is not contested by the bank and is allowed by the court as unopposed.
However, in some cases the bank will contest the value of the property.
This past week, before the Honorable Judge Boroff, a bankruptcy debtor after a trial was able to show that the value of his home was less than $250,000 (the outstanding balance on his first mortgage) and thus able to strip the loan. The numbers were close. The bank valued the home at $260,000 and the debtor at $240,000.
This was a big win for the debtor/home owner. His second mortgage, with an outstanding balance of over $100,000 will be completely eliminated through the bankruptcy.
The debtor being able to eliminate his second mortgage and credit card debt is now in a position to make more affordable monthly mortgage payments and will likely be able to keep his home, whereas before bankruptcy he was facing foreclosure due to loss of income and mounting debts.
This is a great victory for the debtor.