What is a “lien strip”?

In Chapter 13, if your house is worth less than what you owe just on your First Mortgage we can file a motion to strip (“avoid”) your Second Mortgage. Essentially this turns your Second Mortgage into an unsecured debt which will then be discharged at the end of your case. This can be a major windfall for folks, but it is effective only if you stay in your case until the conclusion of your Plan. A formal appraisal is required to show the judge that your house is indeed worth less than what is owed on your First Mortgage. We deal with several local appraisers who we can trust to come up with an accurate value. Lien strips are not available in Chapter 7, and never with regard to First Mortgages.