In Chapter 13 bankruptcy, liens such as mortgages, security interests and even voluntary liens can be stripped or reduced to the actual fair market value of the collateral. This is often called lien stripping, lien avoidance, and cram downs.
Home Mortgage Liens
In today's economy many people have multiple mortgages on their property. Those mortgages were lended when property values were high. The downturn in the economy has caused home prices to plummet leaving some home owners owing substantially more on their home than it is worth.
A home mortgage lien can be stripped in Chapter 13. The second or third mortgage must be wholly unsecured. Which means the home must be worth less than what is owed on the first mortgage. To obtain the most accurate value of your home we recommend getting a Comparative Market Analysis (CMA). Any realtor will be able to complete this and it should be done free of charge. They will look at comparable homes in your area and base the value on recent sales.
To successfully strip the lien a Chapter 13 must be filed. The attorney will then file a Motion to Avoid the Lien of the mortgage company. Once the court enters the order avoiding the lien the Debtor needs to record the order at their local recorders office. The Chapter 13 must also be successfully completed. If the case is dismissed without a discharge the lien will re-attach to the property.
The most common form of lien stripping involves personal vehicles. For instance, if the vehicle is worth $6,000 and the consumer owes $8,000 to the secured creditor the consumer can pay $6,000 plus interest in a Chapter 13. Two thousand dollars is then stripped off the collateral (car). This is commonly referred to as "cramming down" the loan. The Chapter 13 plan must provide for the secured portion of the debt to be paid in full over the life of the plan. The interest paid is generally lowered as well to approximately 4.25%. The $2,000 that is now unsecured can be paid less than 10% along with other unsecured claims.
According to §506 of the bankruptcy code, vehicles purchased within 910 days of filing are not eligible to be crammed down. This rule, unfortunately, eliminates many consumers. However, if the vehicle was purchases more than 910 days (2.5 years) ago the vehicle will be eligible for lien stripping in a Chapter 13. It may also be advantageous for some consumers to wait until the 910 have passed to file bankruptcy if they are significantly upside down on a vehicle they wish to keep.
If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com. Jackson & Oglesby Law can assist you with all aspects of your bankruptcy case. If you have questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping foreclosure or wage garnishment, avoiding liens, stopping law suits, ending creditor harassment, discharging debt, etc. we can help! Please call us today for your free consultation to determine which bankruptcy may be right for you.
Monday, August 15, 2011
Monday, August 1, 2011
Bankruptcy will discharge most general unsecured debt. Receiving a "discharge" in bankruptcy means a person will no longer be legally responsible for paying the debts after bankruptcy. Most debt is dischargeable through bankruptcy. However, there is some debt that bankruptcy will not discharge.
The most common types of non-dischargeable debts are student loans, tax debt assessed within the past three years, child support or maintenance, debts caused by willful and malicious injuries to person or property, government fines and penalties, debts for personal injury or death caused by intoxicated driving, certain condominium or home owners association dues and fees, debts not listed by the debtor on the bankruptcy schedules filed with the court, debts incurred by lying or fraud, debts from embezzlement and larceny, and debts you owe under a divorce decree or settlement.
Slightly more debts can be discharged through a chapter 13, than in a chapter 7. These debts include debts arising from a divorce decree or settlement, debts for willful and malicious injury to property, and debts incurred to pay non-dischargeable tax obligations. The discharge will not occur immediately in a chapter 13. To receive the discharge a debtor must generally complete their chapter 13 plan payments which can last from 36-60 months.
Most people file bankruptcy to discharge or stop the following:
- Credit Card Debt
- Medical Bills
- Income taxes assessed more than three years ago
- Creditor Lawsuits
- Wage and Bank Garnishments
- Creditor Harassment
- Discharge Debt from an Accident to Reinstate a Suspended Driver's License
The main goal of bankruptcy, for most people, is to obtain a financial fresh start. This can be obtained by discharging debt through bankruptcy. The process may seem stressful, but most debtors feel an immense sense of relief from stress once the mountain of debt is discharged.
If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com. Jackson & Oglesby Law can assist you with all aspects of your bankruptcy case. If you have questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping foreclosure or wage garnishment, avoiding liens, stopping law suits, discharging debt, etc. we can help! Please call us today for your free phone consultation to determine which bankruptcy may be right for you.