Getting Rid Of Subsequent Mortgages: Taking A Look At The Lien Stripping Process In Chapter 13 Bankruptcy

The average long-term U.S. mortgage rates have risen to 3.76%. These rates are still incredibly low based on historical records; however, with the economy still in a recession and with the average American household owing approximately $15,950 in credit card debt, many households are having a hard time paying off their mortgage, or lien, every month. Some homeowners have even taken out a second mortgage in order to have the funds needed to pay off other debts. If the debts are continuing to rise, and you are starting to feel suffocated, it may be time to jump ship by filing for chapter 13 bankruptcy and going through a unique process known as lien stripping.

The Basics of Lien Stripping

Although mortgages are considered as secured debts because they are backed up by a valuable asset, the priority of which the mortgages are to be paid off will be dependent on when they were recorded within the county. In short, if you took out two mortgages on your home, the first mortgage would have priority over the second one, and would be paid first. 

Knowing this piece of information can be the key to your financial freedom, as you can take advantage of a process known as lien stripping when you file for chapter 13 bankruptcy. Lien stripping involves removing any mortgage that is not the primary from your record as long as you owe more on your first mortgage than what is considered to be the fair market value of your home. This means that the second mortgage that you took out can be wiped from your credit file entirely if the what you owe on the first mortgage is more than what your house is worth.

The second (or even third) mortgage will be considered as an unsecured debt if you successfully apply the lien stripping process, which means that you will no longer be responsible for paying back the debt in full. You can still keep your home by making repayments through the approved chapter 13 repayment plan. 

The concept behind lien stripping revolves around the fact that, even if your house was sold, the sale will not be able to pay back the second mortgage once the first mortgage, which takes first priority, is paid off in full.

Subsequent Liens after Chapter 13 Discharge

When you file for chapter 13 bankruptcy, you will be responsible for drafting up a reasonable repayment plan with a bankruptcy trustee. The repayment plan must be completed within a 5-year time limit although some debtors may qualify for a 3-year plan instead. The repayment plan will draft out all of the creditors that you are responsible for paying for a specified amount of time before you are to be relieved of all of your debts. Once you did your time, all debts that are considered as unsecured debts will be removed from your credit file.

Since your second (or third) mortgage is now considered as as unsecured debt, you won't have to worry about it anymore. The creditors will basically have to settle for a reduced payment, if any at all, depending on the amount of debts and assets that you have accumulated when filing for bankruptcy. Once all of the terms and conditions of your repayment plan has been fulfilled, and all of your secured debts are paid in full, the creditors of all subsequent debts must release you from your debts when you are finally discharged from chapter 13 bankruptcy. 

If the creditors have failed to remove the lien after you have been discharged, simply get your bankruptcy trustee or attorney to give the creditors a call in order to give them a gentle reminder that the debt must be removed from your file. If the creditors refuse, you will have to file a notion with the court. 


Although filing for bankruptcy is not an ideal route to take, it may be your best bet at finally achieving financial freedom. Those who are having a difficult time paying back all of their mortgages and are behind on payments may want to go to sites and consider filing for bankruptcy under chapter 13 and going through the lien stripping process in order to remove some of the debts from their shoulders, and still be able to keep their home.