By filing for bankruptcy, you may be able to remove, or strip off, the unsecured portion of a debt. You may also be able to cram down a debt to the current value of your property. This process is known as lien stripping. The bankruptcy attorneys at Anidjar & Levine offer exceptional counseling to Fort Lauderdale clients, including the advantages of lien stripping. We can review your case and discuss whether lien stripping can help eliminate some of your debt.How to Cram Down a Florida Debt
Lien stripping is the process by which you can remove liens that are unsecured. When you file for bankruptcy, your debts will be categorized as either secured or unsecured. Secured debts are tied to assets. A creditor secures a debt by placing a lien on your property. The property acts as collateral for the debt. If you do not make payments on your debt, the creditor has the right to sell or take the property. Unsecured debts, on the other hand, have no collateral. In other words, the creditor has no right to any property if the debt is not repaid.
Two examples of secured debt are mortgages and car loans. A creditor will secure these types of debt by placing a lien on the property. If the value of the creditor’s claim is more than the value of the property, a portion of the creditor’s claim is unsecured. When the claim exceeds the value of the property, it may be possible to strip the unsecured portion of the lien.
Lien stripping is generally available only through Chapter 13 bankruptcy. In Florida, you may be able to lien strip in Chapter 7 bankruptcy, but it is a difficult prospect and one which few courts permit
By filing for Chapter 13, a court can strip the liens off debts that have no equity in the property to which they are tied. You will make some payments to these creditors through your Chapter 13 repayment plan, but the remaining debt will be discharged once you complete your bankruptcy.Lien Stripping, Mortgages, and Vehicles
You can strip off the liens on junior mortgages in bankruptcy if your home’s value is less than the amount of the senior mortgage. Let’s assume your home is valued at $400,000. You have three mortgages: the first for $300,000, the second for $100,000, and the third for $50,000. If your home were sold in a foreclosure sale, the first mortgage lender must be paid before any other lender because it secured the lien on your property prior to the others. However, both the first and second mortgage lenders are secured in this example because the value of your home does not exceed the amount of their claims.
By contrast, the third mortgage lender would not receive any money in a foreclosure sale. There is not enough equity to secure its claim on your property. It is wholly unsecured, and you may be able to strip its lien through Chapter 13 bankruptcy.
You can also use lien stripping to possibly avoid vehicle repossession by reducing, or cramming down, the lien on your vehicle to its present value. For example, a car loan lender may have a $10,000 claim secured by your car. Your car, however, may only be worth $6,000. The lender has a secured claim for $6,000 and an unsecured claim for $4,000. By filing for Chapter 13, you can pay the secured portion of the claim through a repayment plan and potentially have any unsecured portion of the debt discharged at the conclusion of your bankruptcy.Attorneys Helping Hollywood Residents Make a Fresh Start
The Hollywood bankruptcy lawyers at Anidjar & Levine can help you wipe the slate clean of most of your debt. We can provide the knowledgeable representation you need to successfully complete your bankruptcy proceeding. Our attorneys can advise you on whether lien stripping is possible in your case, and how it may ultimately reduce your debt burden. We provide dedicated services to clients in Miami and throughout South Florida. Call us at (800) 747-FREE, or fill out our Contact Us form for a free and confidential consultation.