Debt Relief Through Loan Modification or Lien Stripping
If your home is not worth what is owed against it, you have several options. One is to negotiate with your lender(s) to see if they will reduce the amount owed. This effort is known as loan modification. Lenders are not required to negotiate and, as you might expect, most often do not find it in their best interest to do what is most advantageous to you. For example, let’s say your home is worth $300,000 and you have a first mortgage of $350,000 and a second mortgage of $100,000.00. In most instances, neither lender will want to reduce interest, payments or principal. Understandable, but this does not help you in your efforts to stay in your house.
Lien “stripping” is the legal process, in a Chapter 13 Reorganization, whereby a judge grants a motion to avoid, or strip, the lien interest of a second or third mortgage if there is no equity remaining above the amount owed to the first mortgage holder. For instance, in the above example, there is more money owed on the first mortgage than the property is worth. In other words, there is no money left after the payment of the first mortgage to pay any junior (mortgage) lien holders. Therefore, you would be entitled to strip the lien of the second mortgage, make no payments on that mortgage during your Chapter 13 and treat that loan as an unsecured creditor.
While we encourage loan modifications that prove financially beneficial to our clients, our firm does not handle negotiations with creditors. We have found that lenders generally prefer to deal directly with their borrowers. However, we often assist clients in determining whether or not such loan modifications will be successful.
The founder of our firm, attorney David R. Gunnin, has been handling bankruptcy and debt relief matters for nearly 30 years. He has helped thousands of clients find solutions to their debt problems. To schedule a free consultation with Mr. Gunnin, contact us at one of our convenient locations, including our law office in Chino, California.
How Can Loan Modification Help?
Modification of an existing loan can provide relief in a number of ways, including changing the length of loan, reducing the principle and/or reducing the interest rate. The goal is give you an affordable monthly payment. One of the best ways to achieve this goal is to obtain a fixed rate mortgage so you can get out of an adjustable rate loan (ARM).
To speak with a lawyer about bankruptcy, loan modifications, lien stripping, debt consolidation, short sales and other debt relief services, contact the Law Offices of David R. Gunnin. We are pleased to serve clients throughout Orange County, Los Angeles County, Riverside County and San Bernardino County.