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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38565
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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What is the law regarding stripping the second mortgage in

Customer Question

What is the law regarding stripping the second mortgage in a Ch13 Bankruptcy in Nevada? I know the amount owed on the first mortgage has to be more than the value of the property. Are there any hidden legal ramifications if the attorney strips the second mortgage? Is it possible for a Ch13 not work and then refile for a Ch13 or a Ch 7, 6 months later?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 7 years ago.

Nevada is in the 9th Federal Circuit (the only circuit that recognizes the "lien stripping" mechanism that you describe). This means that the bankruptcy court can void a junior lien in Chapter 13, as long as the first lien is worth more than the fair market value of the underlying property. See In re Zimmer, 313 F.3d 1220 (9th Cir. 2002).


However, the lien is only avoided on discharge, so if the case is converted to Chapter 7, or discharged under the Chapter 13, hardship section, then the junior lien remains valid.


Not that it would matter, because if you end up in Chapter 7, you're probably losing everything anyway.


Hope this helps.


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Customer: replied 7 years ago.

The junior lein being the first or the second mortgage?

Expert:  socrateaser replied 7 years ago.
Junior is any lien other than the first, which is the senior lien.