In years past, one of the great benefits of a Chapter 13 bankruptcy, versus a Chapter 7 bankruptcy, was the availability to complete a lien strip. A lien strip is the ability for the bankruptcy court to void a second mortgage, or any other junior mortgage, on your residence when the value of the residence is less than the amount on the first mortgage. This means if your house is underwater on the first mortgage, through a Chapter 13 bankruptcy you can get rid of second and third mortgages.
In November 2014 the Supreme Court of the United States agreed to hear a case about the availability of lien strips in a Chapter 7 bankruptcy. Oral arguments for the case are scheduled for March 24, 2015. If the debtors win, this will change the landscape of bankruptcy in Arizona and across the country. Keep your eyes out for news about the case, Bank of America v. Caulkett.
