Stripping Second and Third Mortgages!!!

Chapter 13 Bankruptcy will allow a Debtor to strip a subordinate mortgage if the value of the house is less than the superior mortgage.  This means subordinate mortgages don’t have to be paid and no longer have a lien against your home.  Example:  Present Value of House $150,000.00, First Mortgage amount of $160,000.00 and a Second Mortgage amount of $75,000.00. This is a perfect example of a over encumbered house that would be eligible for a lien strip in a chapter 13 bankruptcy. Lien Strips can only be done in chapter 13 cases not chapter 7.

What happens to the Second and Third Mortgage after they have been Stripped?

They become unsecured debt along with all of your other credit cards, medical bills, repossession etc. These debts are only paid if you can afford to pay them. In most cases they get paid very little but it depends on your income level.