How to strip a lien in bankruptcy

On Behalf of | Mar 9, 2020 | Chapter 13 Bankruptcy |

Individuals who file for Chapter 13 bankruptcy in Tennessee could potentially have a second mortgage lien stripped. Chapter 7 cases only deal with unsecured debts, and this is why a lien cannot be stripped in a liquidation bankruptcy. Typically, debtors are allowed to have the lien stripped after completing a three- or five-year repayment plan. During the repayment period, the second mortgage balance will be converted from secured to unsecured debt.

Unsecured debts are typically discharged at the end of a repayment period. It’s important to note that stripping a lien is a separate process from discharging a debt. The bankruptcy proceeding itself only addresses the debts that a person owes to a creditor. A bankruptcy court may come up with a specific process that debtors can use to have a lien removed after a debt is discharged.

In some cases, an individual will simply submit a form to the court asking that this take place. An attorney may be able to take steps on a debtor’s behalf to have a lien removed in a timely manner. Legal counsel could also help a debtor get information about a second mortgage loan removed from his or her credit report after the lien has been removed.

By filing for Chapter 13 bankruptcy, one could reorganize secured debts such as a mortgage or second mortgage. In many cases, debtors can keep property, assuming that they follow through with their repayment plans. During the repayment period, creditors are typically barred from contacting debtors about their balances. They are also typically prohibited from filing lawsuits until a case has been discharged. Creditors may take steps to repossess a home or other real estate after this occurs.


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