$172K Lien on Client’s House Reduced to $18K Through Chapter 13 Bankruptcy

A client took out a home equity line of credit on her home fifteen years ago. After five years the payments switched from interest only to interest plus principal, a jump from $300 to $1,200 a month. Client couldn’t afford it, so stopped making payments.

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After ten years, the servicer began foreclosure proceedings, filing a notice of default that client was $45K behind on her payments and owed a total of $172K. We filed a Chapter 13 bankruptcy the day before the foreclosure sale. Then we filed a motion to avoid the servicer’s lien, based on the fact that client’s house had three senior loans and the resale value of the house is restricted. The servicer did not oppose the lien strip motion and the court approved a bankruptcy plan where the client would pay $500 a month for 3 years, after which the entire $172K loan would be removed from the client’s house.