How can lien stripping help me if I am in a financial pinch?
Many people in the Detroit area have to use their home equity to support themselves during difficult financial times.
For example, when an unexpected repair comes up, a family may have to take out a second mortgage. Likewise, other Michiganders might take out a Home Equity Line of Credit so that they can have funds to cover emergency and an ongoing household expenses.
While these types of loans can be very valuable, the problem is that if a family continues to struggle or faces another setback, they become just another debt that the family must address but simply cannot repay.
A Chapter 13 bankruptcy can provide relief from second mortgages
Oftentimes, when a family is under financial pressure, their homes will be underwater. What this means is that what they owe on the home is more than what the home is worth.
This of course is not a good situation, but a Chapter 13 can help a family make the most out of it.
In the right circumstances, a debtor could use a Chapter 13 as an opportunity for lien stripping. The details of lien stripping can be complicated, and specific questions should therefore be directed to an attorney.
In general, if a homeowner is underwater, he or she may be able to strip off second or third mortgages from the house. What this means is that the homeowner can treat those debts as unsecured as opposed to secured by a lien.
Practically speaking, in a Chapter 13, a person has either to pay secured debts in full or, at least, to keep up on the monthly payments as they come due. Unsecured debts, on the other hand, can often be paid back for pennies in the dollar over the course of a Chapter 13.
The end result is that a family can save thousands or even tens of thousands of dollars in debt with the strategic use of lien stripping.