On June 4, the United States Bankruptcy Court for the Eastern District of Michigan adopted "Guideline 12."  This guideline applies to any Chapter 13 case in which a debtor proposes to strip a junior lien on real property under §§ 1322(b)(2) and 506(a) of the Bankruptcy Code. If the lien strip is agreed upon by the debtor and the lien holder, the debtor and the lien holder may file a stipulation in the bankruptcy case and submit a proposed order accomplishing the lien strip. If the debtor does not have the agreement of the lien holder to the lien strip, the debtor must file an adversary proceeding contemporaneous with the debtor's Chapter 13 plan. In such case, the plan must contain a provision informing the lien holder that an adversary proceeding to strip the lien has been filed under §§ 1322(b)(2) and 506(a) of the Bankruptcy Code. A Chapter 13 debtor filing such adversary proceeding is exempt from payment of the adversary proceeding filing fee. Any lien strip default judgment entered in such adversary proceeding must include the following language:

IT IS ORDERED that upon completion of the debtor's Chapter 13 plan and the entry of a Chapter 13 discharge order in bankruptcy case number , the mortgage ("Mortgage") dated , covering the following described property ("Property") situated in the City of , County of ______---', State of , and further described as follows:
[legal description]
recorded in the County Register of Deeds on --", Liber _---", Page , will be stripped from the Property and discharged.
IT IS FURTHER ORDERED that upon completion ofthe debtor's Chapter 13 plan and the entry of a Chapter 13 discharge order in bankruptcy case number ___---", the debtor may record a certified copy of this order, with a copy ofthe debtor's Chapter 13 discharge order attached, with the County Register of Deeds, which will constitute and effectuate the discharge ofthe Mortgage.
IT IS FURTHER ORDERED that if the debtor fails to complete the debtor's Chapter 13 plan and obtain a Chapter 13 discharge order in bankruptcy case number ___----', this order does not affect the validity or enforceability ofthe Mortgage and may not be used in any subsequent bankruptcy case ofthe debtor either to compel
the holder of the Mortgage to execute a discharge of the Mortgage, or to otherwise act as a discharge of the Mortgage.

     The Bankruptcy Code generally allows "lien stripping" - the elimination of a second or third mortgage - in Chapter 13 cases where the value of the home is less than the amount owed on the first mortgage. 

-Drew Broaddus