Contact Information

Lockhart, Britton & Koch

Grossmont/La Mesa:

7777 Alvarado Road
Suite # 622
La Mesa, CA 91942
(I-8 at Fletcher Parkway)



Appointments are available
Monday-Friday 8:30 a.m.-5 p.m. and
Saturday (except holiday weekends)
9 a.m.-noon.

Lien Stripping

What is “lien stripping” and how can I benefit from it?

Lien stripping is a concept in Chapter 13 debt repayment cases. It is not available in Chapter 7 cases. Basically, if you own real estate and have both a first and second (and/or third) trust deed against the property and if the second trust deed against your house has no value protecting it, you can convert the second trust deed into unsecured debt and pay it back through a Chapter 13 Plan in a reduced amount. In other words, if you owe more money on your first trust deed than your house is worth, then there is no value protecting the second trust deed and it can be “lien stripped."

For example, if your house is currently worth $300,000, but you owe $310,000 on the first trust deed and $50,000 on the second trust deed, then there is no value protecting the second trust deed. The same reasoning applies to a third trust deed. So, if you qualify to file a 10% Chapter 13 Plan, then you will only pay $5,000 on the second trust deed ($50,000 x 10%). If you complete the Chapter 13 Plan and receive a discharge, then at the end of the case the lien of the second deed of trust will be removed from your house and you will no longer owe the debt. The actual percentage of payment in your Chapter 13 cases is very complicated and must be determined by your attorney after he has reviewed all of your income and expense information.

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