Sometimes, having a good job and a solid income is not enough to keep a person in New Jersey afloat financially. In fact, if you are struggling to pay all your bills every month and still have enough left for the necessities of life, you are not alone. We at William H. Oliver, Jr. & Associates often advise our clients about how lien stripping may be the solution to their debt problems.
Lien stripping is something that can occur when you file Chapter 13 bankruptcy if you owe more than your house is worth. There are many benefits to lien stripping, the most obvious being that you can prevent your second mortgage holder from foreclosing on your property. Lowering the amount of your monthly debt can also help you get control of your financial situation.
In a Chapter 13 bankruptcy case, the amount of income available to pay bills each month is determined. Then, the trustee distributes this amount to your creditors each month. However, secured loans are paid first. Unsecured loans, such as a second mortgage, are only paid if there is enough income. Because the loans are not secured by collateral, they may be discharged rather than paid.
Discharging debts comes at the end of the bankruptcy, which typically lasts at least three years, but as long as five years. During that time, you must keep up with your court-ordered payments to the trustee, or you could have your case dismissed. At the end of the period, though, you are likely to be back on your feet and still living in your home, making your original mortgage payment each month. More information about lien stripping is available on our webpage.