How to Proceed with a lien strip ?

To strip a lien, the debtor must favorably do something. The plan must provide for the lien strip (if a lien strip is desired), a lien is not stripped just because one’s bankruptcy plan provides for it. The debtor must also seek an order from the court providing the desired relief. How is this done?First of all, make sure the Court has the jurisdiction to grant you the solution you need. As mentioned above, the process is based upon 11 U.S.C. §506 which refers to the determination of secured status and provides, in part, “An allowed claim of a creditor secured by a lien on property in which the estate has an interest, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property.

The Oakland bankruptcy judges have all taken the position that the property at issue must be property of the bankruptcy estate at the time the motion and/or the adversary proceeding seeking to value the security is filed.Another jurisdictional issue to consider in planning how to file a Chapter 13 case to strip a lien is whether the Bankruptcy Court has jurisdiction over the property to do so. For example, if title to the real property is held in joint tenancy, both joint tenants must file the bankruptcy in order for the Court to have jurisdiction over the entire property. If only one of the joint tenants files bankruptcy, the junior lien can only be stripped from the one-half of the real property that became property of the bankruptcy estate. The half of the property belonging to the non-filing joint tenant is still encumbered by the junior lien and therefore, the property cannot be sold without paying off the junior lien. It is unclear whether the lien could be stripped at all, and what the ramifications would be if the non-filing joint owner fails to make the ongoing payments.

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