Are you drowning in debt because of your housing payments? If you have second or third mortgages, also known as junior mortgages, you should be aware that you might be able to discharge them through lien stripping, a process that takes place during Chapter 13 bankruptcy. 
For example, if the value of your home is determined to be $250,000 and the balance due on your first mortgage is more than this amount, any other mortgages could be discharged following the successful completion of a Chapter 13 bankruptcy case.
Mortgages outside of the initial line of credit are treated the same way as other unsecured debts during a Chapter 13 bankruptcy case. Just like credit card debt or medical bills, junior mortgages are only paid a percentage through a bankruptcy repayment plan.
Once the repayment plan is completed, your house may be “stripped” of additional mortgage debts, as the remaining balance is discharged.
Supreme Court Rules Against Chapter 7 Lien Stripping
It should be noted that the United States Supreme Court recently ruled that consumers could not participate in lien stripping through a Chapter 7 bankruptcy.
In the case, Bank of America, N.A. v. Caulkett, the court ruled that second or third mortgages could not be stripped, even if a first mortgage is worth more than the value of a home. In the past, clients have asked our Lewisville attorneys about lien stripping and how specific bankruptcy filings could impact second or third mortgages.
Now, due to this ruling, there is a definitive answer.
How a Lewisville Bankruptcy Attorney Can Help a Struggling Homeowner
Even though the Supreme Court ruled against consumers when it comes to lien stripping through a Chapter 7 filing, if you wish to reduce mortgage burdens, Chapter 13 bankruptcy is still an excellent option. The ruling has no affect on how Chapter 13 cases work.
You could save your home from foreclosure through a Chapter 13 case, as you make controlled payments through your bankruptcy plan. Additionally, if collectors are harassing you because you have fallen behind on your mortgage payments, you should be aware that a filing generates an automatic stay that puts an end to collection attempts.
To discuss your case with our Lewisville bankruptcy lawyers, you can use the contact request form on this page or call the number listed above. We are dedicated to helping clients overcome financial obstacles.
Shuster Law Firm PLLC – Lewisville Bankruptcy Attorneys
