Southern California Bankruptcy Attorneys Can Reduce Your Debt Through Lien Stripping

Whether you call it being upside down or under water, owing more on your mortgage than your house is actually worth on the market is a discouraging proposition. If the payments become more than you can bear, losing the house to foreclosure may not be enough to wipe away the mortgage debt. Fortunately, there are options to prevent this dire result from coming about, and the consumer bankruptcy attorneys at Rounds & Sutter understand all the options which can be brought to bear in this situation.

How Lien Stripping Works

It is not uncommon for homeowners to obtain a second mortgage on their home. This often seems like the most sensible way to generate additional disposable income for the household to help pay monthly expenses or fund a major purchase. However, this results in two different financial obligations secured by the home, and failure to stay current on either mortgage could lead to foreclosure proceedings.

The situation is different, however, when you owe more on the home than it is worth. While both loans are secured by the house, in the event of a foreclosure, the primary mortgage holder would get paid first, and since the home is under water, there wouldn’t be any money left over for the holder of the secondary mortgage. So in reality, the junior lienholder is in the same shoes as an unsecured creditor. This fact allows a bankruptcy court to strip that second lien away from the house, leaving only the senior mortgage in place.

Even a homeowner who is upside down with only one mortgage may be able to have that mortgage bifurcated, or split into two loans – the amount of the mortgage equal to the value of the house is left as a secured mortgage, while the remainder becomes an unsecured debt. This unsecured portion can then be stripped away in the same manner as a second lien.

Save Your Home. Protect Your Future. Call Rounds & Sutter to Explore Your Options

Lien stripping in bankruptcy is one way to reduce your debt and protect your home from foreclosure. If you are behind in your house payments or in default, or if you are facing pressures from other financial obligations, contact Rounds & Sutter for a free consultation. We will take the time to listen to your situation and help you determine the best course of action and the options available to you.