What are Bankruptcy Lien Stripping and the 910 Day Rule?

Since the real estate bubble burst in 2007, many Georgia homeowners have successfully been able to save their homes from foreclosure by filing for Chapter 13 bankruptcy protection when there are no other options for them.  Bankruptcy stops your creditors from collecting a debt against you. It gives you more time to negotiate a restructuring of your debt with your creditors, and eliminate your unsecured credit card debt.

In order to qualify for a Chapter 13 bankruptcy, you must have a steady income to be able to repay your reduced debt. The good thing about filing under Chapter 13 is you get to keep your home and other assets by agreeing to enter into a court-approved reduced debt repayment plan with your creditors. For homeowners who are upside down, bankruptcy lien stripping has become a popular strategy to get rid of second mortgages, including a home equity loan or line of credit. The court will treat the second lien as unsecured debt. This is good news for debtors who are underwater on their mortgages because all unsecured debt is discharged after you have successfully completed the repayment plan within three to five years.

How this works is you and the first lien holder enter into a repayment agreement modifying your loan.  As long as you make your payments on time and complete the plan, you get to keep your home, and the second mortgage goes away. So in essence, you are only responsible now for making the new agreed upon payments to the first lender. At the end of the payment period, your second mortgage debt is discharged by the court.

However, since bankruptcy matters are serious and complex, before you make a decision to file for bankruptcy, it is recommended that you speak with a Georgia bankruptcy attorney. The attorney can access your financial situation and determine whether bankruptcy is the right option for you.

Bankruptcy 910 Day Rule

If you do decide filing Chapter 13 bankruptcy is the best option for you, another popular strategy that debtors are using to obtain a car loan modification is the bankruptcy 910 day rule. Under this rule, you are able to get your car finance company or bank to modify your car loan by reducing the loan principal to the present market value of the vehicle and lowering the interest rate on the loan so that your payments are more affordable. To qualify under the 910 day rule, you must be upside down on your car loan and have owned the car for at least 2 ½ years prior to filing for your Chapter 13 bankruptcy protection. If you don’t meet this qualification, then you will be responsible for paying the full loan balance if you want to keep your vehicle.  The bank or finance company could repossess your car if you don’t make your payments on time.

For assistance with bankruptcy matters, you should consult with a Georgia bankruptcy attorney. The attorney can prepare your bankruptcy petition, negotiate a repayment plan with your creditors and represent you in court. The attorney understands the Georgia and federal bankruptcy laws, and can help you determine if you qualify for the 910 day rule and/or bankruptcy lien stripping.

Since bankruptcy laws are complex, it is recommended that you consult with a bankruptcy attorney in your area.   If you would like to discuss your bankruptcy options contact my office immediately.

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