Bryan Albue featured in the "Ask the Legal Professional" as seen in the Phoenix Business Journal

Q: I have heard that a home mortgage cannot be modified in bankruptcy.  Is this true and what does the phrase "lien stripping" mean?

A: Generally, a Chapter 11 or Chapter 13 debtor can modify the terms of a secured loan. The amount of the secured claim also can be reduced to the value of the collateral. This is known as "cramdown." A mortgage secured only by a security interest in a debtor's principal residence is an exception and cannot be modified. If a junior lien on a debtor's residence is entirely unsecured, the lienholder may be treated as an unsecured creditor and the lien may be "stripped" from the property. If the lien is partially secured to any extent, then the full amount due to the lienholder must be paid without modification to the loan terms. Whether the property is a debtor's primary residence typically is determined as of the bankruptcy petition date, although some courts look to the date of the loan.