Bankruptcy lien stripping may sound good, but leave you exposed

The recession may be over and home values rebounding in Atlanta and much of the rest of the country. But in the depths of the recent economic distress there were many who found themselves holding onto treasured homes that were no longer worth the paper their mortgages were written on.

Many may still be in such circumstances and where the anxiety of being underwater on your mortgage and the risk of foreclosure exists, a lot of operations stand ready with offers of help that sound good — perhaps too good. Among the siren songs may be those proffering the value of stripping off second mortgage lender liens against your home through bankruptcy.

Such strategies can work, but the circumstances have to be right and unless the people you are working with have depth of knowledge and experience, the lien-stripping process can prove to be more complicated than you know. This is why it’s so important to consult with an attorney with depth of experience.

The claims about lien stripping rest in the possibility that, when you file for bankruptcy protection, your second mortgage or home equity line of credit might be eligible to be declared unsecured debt. Whether you file for Chapter 7 or Chapter 13, that designation means you can potentially see the debt discharged and the lien erased.

The caveat is that you have to be able to prove that your home’s value is worth less than what is owed on the first mortgage. With the economy rebounding, that may not be easy.

Before you make any decisions about debt relief and how to achieve it, it’s important to get a clear picture of all your options. We offer free initial consultations and invite you to visit our Chapter 13 and Chapter 7 comparison. See what the differences are and then consider contacting us. We offer free consultations at many locations.