California is apparently beginning to recover from the housing slump. While that is a good thing overall, it may mean that debtors wishing to strip unsecured junior liens have a limited window in which to do that in Chapter 13 bankruptcy.
Chapter 13 is a payment plan supervised by the bankruptcy court that provides some significant tools to allow individuals to reorganize their debts. One of the tools is to strip off a wholly unsecured junior mortgage (meaning the house has no value to support the junior mortgage if the senior lien was foreclosed upon). This analysis, however, is dependent on value. If values start going up, less homeowners will be able to exercise this option in Chapter 13.
Anyone who has considered filing a Chapter 13 to strip off an unsecured mortgage should consider consulting with an attorney as soon as possible to take advantage of the current state of the market.
