LIEN STRIPPING: AVAILABLE IN CHAPTER 13, BUT NOT CHAPTER 7
Liens typically are unaffected by the bankruptcy discharge, and remain burdens on real property after the debtor no longer has any personal liability for the debt. However, lien stripping, which is an adversary proceeding (a federal lawsuit within your federal bankruptcy case) to obtain an order avoiding the lien is possible in Chapter 13, but only if you complete the plan. Even if you win the adversary proceeding, the lien will be reinstated if your case is dismissed and you don't obtain a discharge.
Strict requirements must be met. You must have an appraisal showing the value of your home is less than the balance on the 1st mortgage. Use http://www.zillow.com/ for an initial estimate of the value of your home. If the value is even one dollar more, then lien stripping (of the 2nd lien) is unavailable. Since appraised values are typically a range, contested issues regarding value may result making the process uneconomical. However, for a certain group of homeowners who have suffered precipitous drops in their home value, this can allow building of home equity.
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