What is a Lien Strip? | Kemp, Ruge and Green Law Group

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What is a Lien Strip?

Lien stripping occurs usually in Chapter 13s, but due to recent law interpretation it is available under Chapter 7s as well. It’s a process by which the assets has a lien on it or more than one lien, and that particular lien is outweighed by the first lien that is on it. For example, it occurs oftentimes in mortgages. There is a first mortgage and a second mortgage. The first mortgage far outweighs the value of the house, so the second mortgage can be stripped and essentially discharged in bankruptcy.