As many Floridians are well aware, the real estate collapse in 2008 hurt senior mortgage lenders, but it caused even more damage to junior lenders whose second liens went from above water to below in the blink of an eye. In the wake of the mortgage crisis, some homeowners took advantage of a rare opportunity.
If a home was upside-down and had no value above the amount of the senior mortgage's claim, they were able to use the Chapter 7 of the United States Bankruptcy Code to effectively strip the junior lien off the property and leave the home's value closer to the water's surface, where it would take less time for the home to start rebuilding equity.
What exactly is "lien stripping" and how can it help me? When a debtor has more than one mortgage on their real estate and the second mortgage is wholly unsecured (there is not one dollar of equity in the property to satisfy the second mortgage holder), then it may be possible to strip away that lien in bankruptcy, so that after the discharge only the first mortgage will be a lien on the property.
In the past, this was only done through the use of Chapter 13. However, thanks to a recent decision in our federal circuit court, it is currently possible to strip away a second mortgage in Chapter 7. However, the 11th Circuit is the only circuit in the country to approve of lien stripping in Chapter 7 bankruptcy. Due to this fact, the law may very well change, or the lender may choose to object to the lien strip and raise the issues to the US Supreme Court.
Would you qualify for lien stripping?
If you are interested in finding out if bankruptcy may be able to strip away the second lien on your property, we urge you to contact an Orlando bankruptcy attorney at The Law Offices of Richard A. Heller, P.A.
We are accredited by the Better Business Bureau and have 45 years of combined experience. When you meet with us in a free consultation, we can help you determine if lien stripping is a viable option for you.
Contact our office today by calling (407) 501-4052 to schedule a complimentary consultation with a member of our legal team.