Part 5

Lien stripping is a powerful tool available under Chapter 13 bankruptcy. If you have multiple mortgages and your home’s value has decreased to the point where the first mortgage exceeds the property’s current value, then Chapter 13 bankruptcy allows you to strip or remove the second or third mortgages.

Lien stripping essentially reclassifies your additional mortgages as unsecured debt, similar to credit cards or medical bills. In your Chapter 13 repayment plan, unsecured debts are usually paid at a significantly reduced rate. At the end of your bankruptcy term, the remaining balance of these stripped liens can be discharged.