33228 West 12 Mile Road , , Farmington Hills, Michigan 48334
248-398-9900 248-398-9900
Lien Stripping

Lien Stripping

Lien Stripping, Mortgage modifications and Reduction of Automobile payments

Only a Chapter 13 or 11 bankruptcy allows lien stripping, mortgage foreclosure protection, and protection from repossession. Filing for a Chapter 7 bankruptcy will not get rid of your second mortgage, nor will it protect your home or car if behind on payments. The most common use of lien stripping is to reduce car loan liens to the present value of the vehicle, but more and more homeowners are using the process to lower second mortgages on their properties during a bankruptcy.


Many property owners find themselves in situations where they carry a first and second mortgage on their primary residence, and the value of the home in today’s market is less than what is owed on the first mortgage. In this situation, a Second Lien can be “stripped” in its entirety through a Chapter 13.

As home values continue to drop nationwide, many mortgage holders find themselves with mortgages that exceed the fair-market values of the properties, an increasingly common situation also called “upside down” or “under water.” For these people, a process called lien stripping through Chapter 11 or 13 bankruptcy may be a good legal option.

Lien stripping is a process of reducing a secured claim to the value of the underlying collateral and is based on several federal laws.

For a residence, the 2nd mortgage can often be stripped in its entirety, if the Fair Market Value of the property is less than what is owed on the 1st mortgage.

For rental properties, the 1st mortgage can also be modified and reduced to Fair Market Value. This is complicated, and not all homeowners can enforce this provision. Again, an experienced bankruptcy attorney is required to fully advise and assess this legal remedy. First, the lien is bifurcated, or separated, into two portions — secured and unsecured. The secured portion of the lien is allowed up to the fair-market value of the property at the time. The balance of the lien, which exceeds the fair market value of the property, is then deemed unsecured. The entire secured portion of the mortgage must be paid in full during the life of the Chapter 13 plan (3 to 5 years). Further, rental income must be high enough to cover the costs associated with the rental property.

Contact Our Detroit, Michigan Bankruptcy Attorney Today

We serve bankruptcy clients in Oakland County, Wayne County, and Macomb County. Our office is conveniently located in Royal Oak, with close access to Madison Heights, Sterling Heights, Lathrop Village, Huntington Woods, Southfield, Berkley, Ferndale, Oak Park, Birmingham, Farmington, and Farmington Hills.

If you, a loved one, or someone else you know needs to strip a second mortgage lien or another type of legal representation from an experienced Metro Detroit, Michigan bankruptcy attorney, call Shirley Horn today at 248-398-9900 or complete the contact form on this website to schedule a free and confidential consultation.

Quick Contact Form

Quick Contact Form