Lien stripping and cram down are used during Chapter 13 bankruptcy filings. They help you modify secured debts, such as car loans or mortgages, to make repayment of these loans more reasonable based on your Chapter 13 repayment plan. Lien Stripping In Bankruptcy The home mortgage exception. In times of fallen real estate values, Chapter 13 offers debtors a chance to eliminate for Not your home. If the real estate is not your primary home, the law is different and less restrictive. It isn’t an all Liens that impair. Can I strip down my mortgage in bankruptcy? Yes, depending on the circumstances. A strip down (reduction of the mortgage) or strip off (elimination of the mortgage) can occur if the real estate is worth less than what is owed on it.
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They help you modify secured debts, such as car loans or mortgages, to make repayment of these loans more reasonable based on your Chapter 13 repayment plan. Most Chapter 13 repayment plans last three to five years. Secured debts are given priority and unsecured debts, such as credit cards and medical bills, come second and sometimes are not paid at all or are discharged at the end of the repayment plan.
Reducing the amount paid on secured debts ensures they will be affordable during the repayment plan and increases the likelihood there will be additional money to put toward unsecured debts.
Cram downs involve the debtor converting a portion of the debt from secured to unsecured. The secured debt is crammed down to the value of the property, while the remaining amount becomes unsecured debt.
For more information on cram downs, check out this information from Fannie Mae. The main problem with a cram down on investment property mortgages is that most courts will require the mortgage be paid in full during the three to five year bankruptcy plan.
This creates an abnormally high payment that most debtors will not be able to afford. This can be solved by amortizing it over a longer period such as 20 or 30 years but providing for a balloon payment at the end of your three to five year bankruptcy plan.
In order to have this type of plan confirmed, the debtor will have to show they have the ability to make the balloon payment. This can be done by showing that debtor can sell other property to pay off the balloon payment balance by the end of the plan. Lien stripping converts an entire debt from secured to unsecured. If a lien on a property is unsecured, it can be stripped off and made unsecured. For example, if a homeowner has a first and second mortgage on his or her home, and there is also money owed on a judgment lien, and the second and third amounts surpass the value of the home, the second mortgage and lien are not secured.
This allows the bankruptcy court to convert the second mortgage and lien to unsecured, which means the debt obligation becomes secondary in the Chapter 13 bankruptcy. Moran Law Group is a debt relief agency according to the U. Bankruptcy Code. We help people file for Bankruptcy. Bankruptcy In Brief Bankruptcy information you can use.
Lien Stripping In Bankruptcy. Need Help in Southern California? Consumer Help Central. She is known for energetic representation of clients and her command of bankruptcy law.
Law firm website design by Rowboat Media. Start Free Bankruptcy Evaluation. Contact Bankruptcy Attorney. Mortgage Debt. Strip Off. Secured Debt. Erich M. Fabricius Raleigh Bankruptcy Attorney Erich Fabricius is available to assist consumers throughout the greater Raleigh area who are filing chapter 13 bankruptcy.
From the Glossary Bankruptcy Administrator. In North Carolina, each judicial district has a Bankruptcy Administrator or BA who fulfill the duties typical of the United States Trustee, including administrative and oversight functions.
Unlike the US Trustee in the Department of Justice, the Bankruptcy Administrator is an independent official within the federal judiciary.
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