Under certain circumstances, in California, junior liens (deeds of trust) can be removed from your home in a Chapter 13 bankruptcy case. This is known as “lien-stripping.” The way it works is: If the fair market value of your home is less than the amount owed on your first mortgage, you can lien strip (remove) the junior liens on the property. This is also known as avoiding the lien in bankruptcy, but the term “avoid” is usually used in connection with judgment liens (involuntary/non-consensual liens) against your property, which can also be removed, but under different circumstances.
What does this really mean? If successful, it means that the debt you owe on any such junior liens will be discharged if you complete your Chapter 13 payment plan, which lasts for 36-60 months. How much your plan payments would be depends on a number of factors, primarily your disposable monthly income.
Lien stripping requires the filing of a Motion with the bankruptcy court (known locally as a LAM Motion) during the Chapter 13 case. It may also, depending on the judge in the case, require an additional “adversary proceeding” to remove the lien.
Schedule a consultation with a qualified bankruptcy attorney if you want to explore the opportunity of eliminating your junior mortgage liens.
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