About This Site
Lien stripping is one of the most powerful tools available in bankruptcy for homeowners who owe more than their property is worth. Under 11 U.S.C. Section 506(a), a secured claim is only secured to the extent of the value of the collateral. Any amount above that value becomes an unsecured claim - and in Chapter 13, a wholly unsecured junior lien can be "stripped off" entirely.
This site will provide a detailed guide to lien stripping and cramdown procedures, covering the valuation hearing process, the distinction between partially secured and wholly unsecured liens, circuit-specific rules, and the critical Supreme Court decisions (like Dewsnup v. Timm) that shape how Section 506 is applied.
If you have a second mortgage or home equity line of credit on an underwater property, lien stripping may allow you to eliminate that debt through your Chapter 13 plan. We will explain the requirements, the process, and the common pitfalls that derail lien strip motions.
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Frequently Asked Questions
What is lien stripping in bankruptcy?
Lien stripping removes a junior mortgage or lien from your property through Chapter 13 bankruptcy. Under Section 506, if your home is worth less than what you owe on the first mortgage, the second mortgage is treated as unsecured debt and can be eliminated through your repayment plan.
Can I strip a second mortgage in Chapter 13?
Yes, if your home value is less than or equal to the balance owed on your first mortgage. The second mortgage must be wholly unsecured - meaning zero equity supports it. You must complete all plan payments for the lien strip to become permanent upon discharge.
What are the requirements for lien stripping?
You must file Chapter 13 (not Chapter 7), the junior lien must be wholly unsecured based on current property value, and you must complete all plan payments. You file a motion to value the collateral, and the lien holder can object. An appraisal is typically required to establish property value.
Check Your Bankruptcy Discharge Eligibility
Use the free screener at 1328f.com to check whether federal timing bars affect your ability to receive a bankruptcy discharge.
Explore Lien Topics
Dive deeper into how liens are handled in bankruptcy:
- How Lien Stripping Works - step-by-step process and legal basis
- Strip Your Second Mortgage - the complete guide for underwater homeowners
- Lien Avoidance Under 522(f) - removing judicial liens from exempt property
- Cramdown in Bankruptcy - reducing secured debts to property value
- Lien Stripping vs. Cramdown - which tool applies to your situation
- Eligibility Requirements - who qualifies for lien stripping
- Key Case Law - Supreme Court and circuit decisions
- After Chapter 13 Discharge - what happens to stripped liens