82. What is a “lien strip”?

One of the biggest advantages of filing a Chapter 13 bankruptcy is that it may allow you to wipe out a junior lien on your home. This is called “lien stripping.” You must file a separate action in bankruptcy court and show that the value of your home is below the amount you owe on your first mortgage and then you may be able to eliminate the security interest of your 2nd or other junior mortgages. For example: if your home is worth $800,000 but you owe $850,000 on your first and a $100,000 on a home equity line, then a chapter 13 bankruptcy may enable you to eliminate the $100,000 lien on your home.

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Lein Strip