Is it possible to strip property liens that were discharged in a Chapter 7 bankruptcy?

Asked on Feb 27th, 2011 on Bankruptcy - California
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To complicate matters even further, the house is co-owned by husband and wife who are separated/divorcing (friendly terms) and only the wife went through ch.7 and is now in ch13. They are desperately trying to sell the property, repay the primary mortgage and walk away w/some equity.
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Answered on Mar 03rd, 2011 at 1:49 PM
The facts of your situation are not clearly expressed in your question. It is possible to strip judicially imposed liens in a Chapter 7. These are judgment liens that have attached to real property that is property of the bankruptcy estate. You refer to "property liens that were discharged in a Chapter 7 bankruptcy." I do not know what you are referring to. For an answer that takes into account your specific facts and circumstances, call me.

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Answered on Mar 02nd, 2011 at 3:45 PM
Generally, no. While I have seen some case law which suggests that it may be possible strip liens from a residence, the general rule is that lien-stripping is only allowed in chapter 13 cases.

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Answered on Feb 28th, 2011 at 2:50 PM
No, it is not possible.

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Answered on Feb 28th, 2011 at 2:49 PM
Generally the value of the house has to be less than the balance of the first lien (first deed of trust). All that was discharged in the Chapter 7 was the personal liability of the wife to pay the second. She does not need to worry about having to pay the second loan if the house is sold in foreclosure or there is a short sale. However, the lien is not removed or stripped in Chapter 7. The house is still subject to the lien for the balance of the second or junior deed of trust which secures the note for the second loan. It sounds like in her case it would be impossible to remove the lien for the second loan since she thinks she might have some equity in the property. The second loan will have to be paid in full for her to be able to sell the house or the second loan holder has to accept less than what is owed in a short sale (in which case she would get nothing out of the sale).

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Answered on Feb 28th, 2011 at 2:49 PM
Yes, it is possible.

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