Can Chapter 13 Bankruptcy Get Rid of a Lien on Your Home - John T. Orcutt - Lein Stripping Can Save Your House Skip to main content

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Can Chapter 13 Bankruptcy Get Rid of a Lien on Your Home?


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Thousands of North Carolina families are currently facing serious problems with mortgage payments and threats of creditors placing liens against their homes. While some unscrupulous lenders or third-party companies will suggest a loan modification can ultimately save your home, this a tactic that simply does not deliver for most families already going through tough times. So, can Chapter 13 bankruptcy remove a lien on your home?

Although it may seem there is no light at the end of the tunnel once a lien has been placed against your home, there is one way that a select number of North Carolina homeowners can protect their property. This is through using a process called “lien stripping”. Only available in a Chapter 13 bankruptcy, lien stripping can remove second and third mortgages, known as “junior liens”, and turn the debt into an “unsecured debt”.

A second mortgage is considered a form of secured debt, meaning that the lender can foreclose on your property once you fall behind on your payments. During a lien stripping, the bankruptcy court is able to take your second mortgage and turn it into unsecured debt. For example, your credit card debt is a form of unsecured debt. Once converted to unsecured debt, the lender is ordered to remove its lien against your property.

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Do You Qualify for Lien Stripping?

There is a catch to this process. Lien stripping only works under a very narrow set of circumstances. But, if you can qualify, it is a really wonderful option to save your home. Let’s look at the three qualifications that must be met in order to use lien stripping during a Chapter 13 bankruptcy:

  • The first thing you must have in order to qualify for lien stripping is a first and a second mortgage on your home. If you have a home equity line of credit, this is considered a form of second mortgage.
  • Secondly, the value of your home must be less than the amount of your first mortgage. This means you can only qualify for lien stripping if the amount of the “senior lien”, or first mortgage, exceeds the home's market value.
  • Thirdly, you must be financially able to afford your home if you do not have to pay the second mortgage payment. Essentially, you must be able to prove to the court that you can make payments on the first mortgage once the second mortgage is wiped out.

If you meet these three elements, you may file for Chapter 13 bankruptcy and propose a reorganization plan that strips away your second mortgage…and the lien the lender placed against your home. The second mortgage is then removed as a lien, then that debt becomes unsecured, allowing you to repay it for pennies on the dollar under a Chapter 13 bankruptcy.

When You Cannot Use Lien Stripping

Unfortunately, the fact that you have a second mortgage does not automatically help. In order to strip a lien from a second or even a third mortgage, you cannot have any equity securing the second mortgage lien.

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It Never Hurts to Try

If you are considering lien stripping to save your home, the very best thing you can do is to find an experienced North Carolina bankruptcy attorney. They understand the process and the qualifications. If, during a consultation, they find that your property value is low enough to proceed with a lien stripping, you can opt to proceed with the Chapter 13 bankruptcy.

Whether you can qualify for lien stripping or not, if you are unable to pay your mortgage, it is truly time to consult with a local North Carolina bankruptcy lawyer. Filing a timely bankruptcy can make all the difference when it comes to your home. Take the first steps toward a fresh start today.

Dedicated to helping residents of North Carolina find the best solutions to their debt problems. Don’t waste another day worrying about your debt. Call +1-919-646-2654 today to schedule a free initial consultation to discuss your bankruptcy options.

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