What is a Bankruptcy Discharge?
The goal in any bankruptcy case is to obtain a discharge of a clients’ debts. A discharge essentially means all your debt is deleted or extinguished.
What is an Automatic Stay?
Once a bankruptcy petition is filed with the court, a temporary court order called an automatic stay immediately goes into effect which temporarily stops all debt collections, real estate foreclosures and vehicle repossessions.
What is Lien Stripping?
Lien Stripping allows you to get rid of a 2nd Mortgage if the home securing the 2nd Mortgage has depreciated to the point where the home is worth less than the 1st Mortgage. The best way to explain Lien Stripping is to give an example.
Let’s say you buy a home for $100K on a 1st Mortgage and a few years later the home appreciates in value up to $200K. At this point you decide to take out a 2nd Mortgage for $100K to do repairs and renovation on your home. A few years later, the real estate market crashes and your home is now worth $100K. This 2nd Mortgage on your home has no equity securing the 2nd Mortgage because the home is worth $100K and that only secures your 1st Mortgage.
In a Chapter 13 Bankruptcy, the 2nd Mortgage is treated as an unsecured debt (like a credit card) and discharged. The 2nd Mortgage is released at the end of a Chapter 13 repayment plan. This can be done by showing the Court that the home is only worth $100K (get an appraisal) and filing a motion to strip the mortgage with the court. This can save you thousands of dollars.
Dunne Law Offices, P.C.
1500 JFK Blvd, Two Penn Center, Suite 200
Philadelphia, PA 19102