Quick Answer: What Is Lien Stripping The Second Mortgage?

How does a second lien work?

A second mortgage or junior-lien is a loan you take out using your house as collateral while you still have another loan secured by your house.

The term “second” means that if you can no longer pay your mortgages and your home is sold to pay off the debts, this loan is paid off second..

What happens after you pay off Chapter 13?

After you have paid off all the debts covered by your Chapter 13 case, you must go to bankruptcy court one last time for your discharge hearing. If you prefer, you may send an attorney to the hearing in your place. … If there are no objections from your creditors, the judge will discharge your Chapter 13 bankruptcy case.

What is a lien strip?

Many people have multiple liens on their properties. … Lien stripping is the process of eliminating junior liens during Chapter 13 bankruptcy. It allows a bankruptcy filer who is “upside down” on his or her house to wipe out liens on a parcel of real property that are wholly unsecured.

Can a 2nd lien foreclosure?

Depending on the state, second mortgage lien holders might initiate foreclosure and then sue borrowers for any deficiencies or negative balances. California, for example, allows lien holders using judicial or court-ordered foreclosures to pursue borrowers after foreclosure for any resulting deficiencies.

What happens to a second mortgage after foreclosure?

Following a first-mortgage foreclosure, all junior liens (including a second mortgage and any junior judgment liens) are extinguished and the liens are removed from the property title. But the second-mortgage debt and creditor’s judgment remain, even though they’re no longer attached to the foreclosed property.

Can you get rid of a second mortgage in Chapter 7?

If you file for Chapter 7 bankruptcy, you cannot get rid of second mortgages, home equity lines of credit (HELOCs), or home equity loans. Filers in the Eleventh Circuit Court of Appeals, are no longer able to strip off (remove) these types of liens in Chapter 7 bankruptcy.

What happens to a second mortgage when the first is paid off?

The mortgages are ranked in the order in which they were lodged. So in the event that the debt isn’t paid and the property is sold, the first mortgage is paid back before any money is paid to the second or third mortgagee (lender).

How does a second lien holder foreclose?

Yes, a second mortgage holder can foreclose, even if you are current on your first mortgage. Just like any type of loan, if you are behind on your payments, the lender has the legal right to take whatever property was offered as collateral on the loan.

What happens to tax liens on foreclosed property?

When an IRS lien is foreclosed, the IRS gets 120 days to “redeem” the home by paying the amount the home sold for at the foreclosure sale, plus interest and various other amounts. If the IRS redeems, it becomes the legal owner of the home. IRS redemptions don’t happen very often.

What is a motion to avoid lien?

If your attorney is aware of the judicial lien(s) and you do not have any non-exempt equity in property to secure the liens, your attorney can file a motion to avoid a judicial lien to prevent the judicial lien from affecting you in the future after the debt was discharge in your bankruptcy.

What is an unsecured lien?

In finance, unsecured debt refers to any type of debt or general obligation that is not protected by a guarantor, or collateralized by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment.

Can 2nd mortgage be discharged?

Lien Stripping Second And Third Mortgages Discharging second or third mortgages in bankruptcy is called lien stripping. … As an unsecured debt, a second or third mortgage can be discharged in Chapter 11 or Chapter 13. Even people with high levels of income and/or debt may be eligible for lien stripping.

What happens if I can’t pay my second mortgage?

When you fall behind in payments on the second mortgage, the second-mortgage holder will probably initiate a foreclosure because it will recover part or all of the money it loaned to you once the property is sold at a foreclosure sale.

How do I get rid of a second mortgage lien?

Through a lien strip, the bankruptcy court essentially takes your second mortgage (which is a secured debt where the lender can foreclose on your property if you miss your payments) and converts it to an unsecured debt (just like a credit card debt) by ordering the lender to remove its lien from the property.