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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38910
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I filed for BK-7 last year and was given a discharge, but my

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I filed for BK-7 last year and was given a discharge, but my lawyer did not explain to me that there is such a thing as " Lien stripping" because that was the whole purpose for filing for BK-7,

she just spent 2 hrs with me regarding the FAQ and no action is taken unless I pay the whole $1500.00, and during the creditors meeting she was "No Show".Can I avail of any legal procedure now that I'm in the processed of being foreclose?. After the discharge of my BK-7 she no longer return any of my phone call.

Please assist me in better understanding your circumstances:

1. In which court was your bankruptcy filed?

2. How much is the approximate unpaid loan balance on your 1st mortgage?

3. How much approximately is your property worth right now?

4. Do you have a 2nd mortgage?

Thanks in advance.
Customer: replied 4 years ago.

Good Morning Counselor:

Here's my answer to your inquiry:


1. Court? Central District Court of California.


2. 1st TD balance- $106.000.00 status current @$839.66/mo


3. Present worth? $329.000.00


4. 2nd TD..$47,000.00 @ $571.40/mo=10 mos behind


5. 3rdTD..$333.09/mo interest only 2.97%=10 mos. behind

Okay, thanks.

Here's the problem. In the case of In re McNeil, 477 Fed.Appx. 562 (U.S. 11th Cir. 5/11/2012), the U.S. Court of Appeals for the 11th Circuit determined that lienstripping of a 2nd lien was permissible in a Chapter 7 case, where the 1st lien was greater than the property's fair market value at the date of filing of the bankruptcy petition.

However, no other federal circuit, district court, bankruptcy appellate panel, or bankruptcy court has concurred with this opinion. Moreover, even some 11th Circuit lower courts have taken issue with the appellate court decision -- which is generally unheard of among federal court judges.

Regardless, California is in the 9th Circuit, so the McNeil decision is not controlling for California bankruptcy cases.

Taken all together, your attorney could have reasonably relied upon the current law in the 9th Circuit and not discussed the possibility of lien stripping in a Chapter 7 case. However, if the attorney did not discuss the possibility of your filing Chapter 13, then that would, in my view, be malpractice.

So, the question is whether or not you could have qualified for a Chapter 13? If yes, then you may have a malpractice claim against the attorney. However, a Chapter 13 filing costs considerably more than a Chapter 13. Typically, the fees are around $4,800, and that's for a simple case without any lienstripping. So, if your attorney is offering to try to strip the lien for $1,500, then combined with your original Chapter 7 fees, that may actually be a bargain.

In my opinion, trying to strip a personal residence 2nd lien in a Chapter 7 under current 9th Circuit precedent is an extremely risky maneuver. It could end up in a protracted appeal, and you won't get an outcome -- though, you may be able to stall for a long time. But, someone will have to pay for the cost of the appeal process, which is practically guaranteed.

By contrast, were you to now file a Chapter 13, you might be able to strip the lien. The remaining question is the fees. No new attorney will take the case without charging the standard Chapter 13 fees, so once again, you're sort of stuck with your current attorney, if you want the discounted deal ($1,500).

I realize that this may not sit well with you, and maybe you really want a new lawyer.

Your recourse would be to sue the attorney for malpractice, and/or file a complaint with the State Bar of California. For a legal malpractice lawyer referral, see this link.

I can practically guarantee that a call from the State Bar to the lawyer will get him/her talking to you again. This is the most common complaint of all clients ("My lawyer wont' call me back!"). But, on the specific issue of the lienstripping-Chapter 7 issue, the "jury" as the saying goes, "is still out." So, it's just not as simple as you may believe (assuming you found an internet website that claims it's easy to lien strip in a Chapter 7).

Please let me know if I can be of further assistance.
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