Chapter 13 Bankruptcy: Understanding Lien Stripping
When filing for a Chapter 13 bankruptcy, lien stripping is a process that becomes available that can remove junior liens and ultimately make any debt accrued unsecured. Junior liens exclude a person’s primary mortgage; therefore, lien stripping is the process of removal of any additional mortgages you may have. Learn more about how Chapter 13 lien stripping can help you.
Chapter 13 Basics
There are several different types of bankruptcy you may look into filing. Filing for bankruptcy does not mean that you will be completely stripped off of your belongings. Each form of bankruptcy is designed to achieve a different purpose. One of the ultimate goals of a Chapter 13 bankruptcy is to reorganize your finances. You will be required to pay monthly installments to a court-assigned trustee. This trustee will then pay the creditors who have filed claims against you for unpaid debt. The series of payments can take anywhere from 36 to 60 months to complete. Once the installments have been finalized, a person under a Chapter 13 bankruptcy will be eliminated of his or her debt and can, therefore, achieve a new start at his or her line of credit. The following is a limited list of other benefits a Chapter 13 bankruptcy can offer you.
- A pre-established time to pay back owed funds on cars, houses, and/or other types of loans, which have collateral.
- The ability to repay past unpaid support obligations such as alimony and child support over the established three (3) to five (5) year plan.
- The opportunity to pay any past due income taxes.
- New terms of repayment for his or her auto loan, assuming it is older than 912 days.
- Protection of your co-signer from assuming the responsibility for your loan.
- Better administration of excessive student loan installments by filing for a Chapter 13 bankruptcy.
- The ability to pay bankruptcy attorney fees as a segment of the petitioned Chapter 13 bankruptcy payment plan, rather than having to pay it up front.
What Liens Can Be Eliminated
Under a Chapter 13 bankruptcy, you may be able to remove the liens against your property. You can do this if the lien has impaired your bankruptcy rights. Chapter 13 gives you specific exemptions that lessen the monthly installments made to your creditors. If you reside in a state that lets you preserve the majority of your property’s equity during the bankruptcy through an exemption, youmay be able to use that exemption to strip any liens placed on your property.
The process of lien stripping also allows you to remove exclusively unsecured liens made on his or her property. When a lien is placed on your house, the importance in contrast to other liens is commonly determined by the time of when the lien was documented in your county of residence. Generally, the first documented lien has a priority over all other additional liens. If your home becomes foreclosed, the original lender must be the first to receive payments from all of the profits of the liquidated assets. This will ultimately mean that any lenders from additional mortgages will be less likely to receive a payment.
In most cases, if the amount owed on the primary mortgage is higher than that of the average market assessment of the home, any additional mortgage lenders will not be able to receive any form of payment from the foreclosed home. This is because since there likely will be no leftover funds once the primary mortgage has been paid off. If a lender does not receive any money from the foreclosed property, this additional mortgage loan is considered to be unsecured. An unsecured property can be removed by means of a Chapter 13 bankruptcy.
A stripped lien will ultimately be handled just as all additional unsecured debts in the bankruptcy. These sorts of accrued debts will commonly not receive any form of payment. Ultimately, they will be discharged at the conclusion of the repayment plan of a Chapter 13 bankruptcy. After the discharge, the creditor for the stripped lien is required to remove the lien off the property.
Chapter 13 Discharge
Bankruptcy law is quite complex, especially regarding Chapter 13 bankruptcy. Bankruptcy law itself has undergone several changes, which is a valid reason in itself to seek professional support. A successful discharge can release you from your debts through the conceived plan. Undergoing a Chapter 13 bankruptcy has many benefits if the plans are followed thoroughly. Contact a professional and knowledgeable attorney who has experience in bankruptcy, particularly Chapter 13 lien stripping. With the help of an experienced bankruptcy attorney, there is a greater probability that the Chapter 13 bankruptcy will be successfully completed.