Advice About Lien Stripping And Cram Downs

If you took out a second mortgage on your home with the expectation that home prices would rise and repayment would not be a problem — you are not alone.

If you are underwater on your mortgage payments, and if your second mortgage is worth less than your first mortgage, we may be able to use Chapter 13 bankruptcy to strip the second mortgage — turn it into dischargeable debt, in other words.

A similar procedure may be possible with some car loans under Chapter 13 bankruptcy. Through a process known as "loan cram down," you may be able to negotiate a Chapter 13 payment plan based on what the car is actually worth, as opposed to the value of the car loan.

Complex issues such as lien stripping and cram downs illustrate the importance of consulting a knowledgeable bankruptcy attorney before taking any formal steps to file bankruptcy. At the Livonia, Michigan, law firm of Charles J. Schneider, P.C., we have provided bankruptcy-related legal services since 1977. Our founder and lead attorney is a certified bankruptcy specialist who oversees every case our law firm handles.

Contact us online or call 734-237-1523 to schedule a free consultation with a Livonia, Michigan, lien stripping attorney.

What Is Lien Stripping?

In a Chapter 13 bankruptcy, the debtor agrees to repay all secured debt, such as past-due mortgage payments and car payments. The debtor repays some portion of unsecured debt if any funds are left over during the three- to five-year repayment plan. However, at the end of the repayment plan, any remaining unsecured debt is eliminated.

If you have a second mortgage worth less than your first mortgage and your first mortgage is worth more than the value of your home, then the second mortgage can be transformed into unsecured debt — because there is no equity in your home to secure the second mortgage. Once the second mortgage is designated an unsecured debt, we may be able to eliminate the second mortgage from your debt burden. This is known as lien stripping.

What Are Loan Cram Downs?

Loan cram downs may be possible with second mortgages and with car loans. The basic concept of a loan cram down is that the debtor pays the creditor the value of the collateral rather than the total value of the loan.

For example, if you owe $20,000 on your car but the value of the car is only $10,000, then we may be able to negotiate a cram down of the car loan so that the total debt owed is $10,000 instead of $20,000.

Special Rules Apply For Lien Stripping And Loan Cram Downs

There is no substitute for in-person advice from a knowledgeable bankruptcy attorney, especially on complex issues like lien stripping and loan cram downs. We urge you to consult a certified bankruptcy attorney at the law firm of Charles J. Schneider, P.C., before making any decisions about bankruptcy, lien stripping of second mortgages or cram downs of car loans.

Contact The Livonia, Michigan, Law Firm Of Charles J. Schneider, P.C.

Schedule a private and confidential consultation with a skilled bankruptcy attorney at the law firm of Charles J. Schneider, P.C. Call 734-237-1523 or contact us online.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.