lien stripping
lien-stripping. Bankruptcy. The practice of splitting a mortgagee’s secured claim into secured and unsecured components and reducing the claim to the market value of the debtor’s residence, thereby allowing the debtor to modify the terms of the mortgage and reduce the amount of the debt. • The U.S. Supreme Court has prohibited lien-stripping in all Chapter 7 cases (Nobelman v. American Savs. Bank, 508 U.S. 324, 113 S.Ct. 2106 (1993)) and in Chapter 13 cases involving a debtor’s principal residence (Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773 (1992)), and the Bankruptcy Reform Act of 1994 modified the Bankruptcy Code to prohibit lien-stripping in Chapter 11 cases involving an individual’s principal residence. [Cases: Bankruptcy 2575. C.J.S. Bankruptcy § 110.]
