Orange County Lawyers Explain Cram Down/Strip Down Options for Collateral in New York. This option can be employed when the collateral is worth less than the amount owed (commonly referred to as “being upside down”) or when the number of payments left on the debt is 5/5(11). In this situation, you can strip any liens that are junior to your first mortgage. So if you had a second mortgage with a balance of $100,000, you could get rid of it through lien stripping in a Chapter 13 bankruptcy. (For more details about lien stripping and how it works, see Getting Rid of Second Mortgages in Chapter 13 Bankruptcy.)Author: Cara O'neill, Attorney.
Lien stripping isn’t available in Chapter 7 bankruptcy. If you keep the house, all liens will remain, and the lender on each loan will be able to exercise lien rights if you fall behind on your payments. If your home equity is upside down, you might be able to strip your junior mortgage lien through Chapter 13 Author: Cara O'neill, Attorney. Jan 27, 2016 · • Chapter 11: a lien will be extinguished if it is dealt with in a plan under section 1141(c) of the Bankruptcy Code. • Chapter 7: debtor cannot strip down creditors' lien on real property to judicially determined value of collateral. Dewsnup v. Timm, 502 U.S. 410 (1992). • Chapter 13: the Dewsnup rule does not apply in chapter 13 cases.
Lien stripping is an exception to the standard rule in bankruptcy that liens pass through bankruptcy unchanged by the bankruptcy discharge. In Chapter 11 and Chapter 13, when the value of the collateral available to secure the lien is less than the debt secured by the lien, the lien may be stripped off or crammed down to the value of the. bankruptcy court to strip off a lien against a primary residence with no value. The courts have generally permitted a "strip off" of completely valueless liens in Chapter 13 cases because, unlike Nobelman, holders of such liens are not "holders of secured claims" and, therefore, are not entitled to .