Jump To Navigation

lien stripping defense

Bankruptcy Lawyer Robert Schaller Defends Against Debtors Stripping 2nd Mortgages

Mortgagees’ investment in mortgage loans is under attack like never before as a result of the US Supreme Court’s decision in Nobelman v. American Savings Bank, 508 U.S. 324, and its most recent progeny. As a result, mortgagees need to protect their substantial investment in mortgaged properties from the growing threat of bankruptcy lien stripping law suits.

Homeowners are increasingly utilizing the bankruptcy laws, in conjunction with the depression in real estate values, as a weapon to discharge mortgage obligations and stripping mortgage liens. As a result mortgagees who fail to defend are in the precarious situation of having their mortgage investments lost in bankruptcy and unrecoverable in any future foreclosure action because of the lien stripping.

Consequently, a strong aggressive legal defense against lien stripping has become an integral part of mortgagees’ protection of their investment in mortgaged properties.

Not Your Father's Bankruptcy Case

The US Supreme Court’s Nobleman decision and its recent progeny has changed the way mortgagees must protect their investment in mortgaged property. Nobleman and its progeny have created new law that now allows debtors to strip mortgage liens and discharge mortgage obligations. In response, a cottage industry has sprouted to help debtors file adversary proceedings to strip liens and discharge mortgage obligations in bankruptcy.

The US Supreme Court’s Nobleman decision changed the fundamentals of bankruptcy defense. Previously, mortgagees had long been protected from lien stripping under the US Bankruptcy Code anti-modification provisions of Section 1322(b)(2). As a result, a strong defense against lien stripping was not required in the past. In fact, no defense was required at all.

In the past, mortgagees had only engaged bankruptcy counsel to worry about receiving the proper amount of postpetition mortgage payments and receiving the proper repayment of mortgage arrearages. Mortgagees engaged non-litigation-minded attorneys to perform “high volume” tasks limited to lifting the automatic stay and objecting to repayment plans.

The paradigm has changed.

Mortgagees need to rethink their defense strategy to lien stripping. Lien stripping is a lawsuit! Lien strippers are attempting to discharge mortgage obligations and make future foreclosure suits invalid. Mortgagees are no longer attempting to minimize the damage relating to bankruptcy. Instead, mortgagees are facing the lost of the entire mortgage investment on stripped liens. Mortgagees must defend themselves as they would defend themselves in a lawsuit: assertive pleadings, comprehensive discovery, probing depositions, and well-prepared trials.

The Schaller Law Firm believes mortgagees need to rethink their “old-school” defense to lien stripping law suits. “High volume” lawyers are getting beat because they have been attempting to use boiler-plate pleadings more appropriate for routine automatic stay motions. The fees charged and the time invested by high-volume lawyers has been inadequate and the cause of some liens being stripped. These counsel have been making ineffective legal arguments and neglecting the more time-intensive fact based defenses.

A strong litigation defense is required to defend against lien stripping lawsuits. Just as the mortgagees would require a strong defense against claims for fraud, breach of contract, or Truth-in-Lending-Act violations. The risk is just too great: the total loss of the mortgagees’ mortgage investment.

Lien stripping defense is best viewed in a light most similar to defending regular lawsuits. Lien stripping defense in adversary proceedings include the following: reviewing adversary complaints; reviewing debtors’ schedules of assets, debts, and plans; filing answers to adversary complaints; attending status hearings; ordering and reviewing real estate appraisals; preparing discovering; propounding interrogatories; tendering document production requests; prosecuting requests to admit; prosecuting discovery motions; conducting 2004 examinations, preparing pretrial briefs, preparing expert witnesses for trial, and conducting trials.

In conjunction with the defense in the adversary case, an aggressive lien stripping defense includes action in the underlying chapter 13 case too. Lien stripping defense in chapter 13 bankruptcy cases include the following: filing mortgagees’ proofs of claim as secured creditors; filing mortgagees’ objections to plans; reviewing debtors’ objections to mortgagees’ proofs of claim; and filing briefs in opposition to debtors’ objections to mortgagees’ proofs of claim. When necessary, a strong defense would also include prosecuting the evidentiary hearings regarding the objections.

In essence, mortgagees need aggressive litigation-minded attorneys to defend lien stripping lawsuits---not “high volume” form filers.

Free Bankruptcy Consultation

For a free consultation, contact Attorney Robert Schaller by completing the Contact Form below or calling at 630-655-1233.

Contact Us

Discuss Lien Stripping Defenses with an Experienced Bankruptcy Lawyer

I am attorney Robert Schaller and have been practicing law for over 24 years. I have represented clients in almost 2,000 bankruptcy cases. I am eager to represent you in your next lien stripping case.

Please contact me to schedule a conference by calling 630-655-1233 or submitting the contact form below.

Contact Information:
First Name *
Last Name *
Email *
Phone # *
Street Address 1 *
City *
State *
Zip Code *
County *
Name of Mortgagee & Questions *

Note, by clicking above you are granting permission and authorizing the Schaller Law Firm to contact you directly. Please note that no attorney-client relationship shall exist until an engagement letter is signed by both the mortgagee and the Schaller Law Firm.

Meeting Locations:

Oak Brook
Oak Brook Pointe
700 Commerce Drive
Suite 500
Oak Brook, IL 60523
Chicago Loop
1 South Dearborn Street
21st Floor
Chicago, IL 60603
4320 Winfield Road
Cornerstone @ Cantera
Suite 200
Warrenville, IL 60555
1450 East American Ln
Zurich Towers
Suite 1400
Schaumburg, IL 60173
St. Charles
100 Illinois Street
Suite 200
St. Charles, IL 60174
500 Lake Cook Road
3rd Floor
Deerfield, IL 60015
One Westbrook Corporate Center, Suite 300
Westchester, IL 60154
63 West Jefferson St.
Joliet, IL 60432