Many creditors are shocked to learn (after the fact) that debtors in a Chapter 13 bankruptcy may be allowed to “strip” or remove their lien from real property. When does this happen?
- If the real property is the debtor’s principal residence
- The debtor filed a Chapter 13 case
- Your lien is a junior, non-purchase money debt
- The value of the real property is LESS than the sum of all senior lien.
If the real property is not the debtor’s principal residence, the lien can be partially or fully avoided depending on the value of the property.
If you have a judgment lien rather than a consensual mortgage lien based on a loan, it is possible for the debtor to avoid your lien in a Chapter 7 or Chapter 13. If the lien attached to the real property prior to the filing of the bankruptcy case, it impairs the debtor’s homestead exemption provided by the Bankruptcy Code. Again, the value of the property and the amount of the senior liens on the date the case was filed must be considered.
This is a confusing area of law. If you are a creditor facing this circumstance, contact Windtberg & Zdancewicz, PLC, to assist you.
If you are interested in learning more about your rights as a creditor, contact Windtberg & Zdancewicz, PLC, at 480.584.5660. Our office is located in Tempe, Arizona. We handle all matters related to a creditor’s rights against a bankrupt borrower. Our attorneys handle cases from pre-litigation collection through litigation, obtaining and enforcing judgments to collect what our clients are owed.