A lien is a lender’s way of keeping an interest in property that is the subject of a debt. For example, when you buy a house the mortgage lender maintains an interest in the home until it is paid in full by recording the mortgage. The recording office keeps track of all things recorded against a piece of property, and those things act as liens against the property. If your property has a lien on it, you will have to satisfy that lien before you can sell the property. If you do not satisfy the lien, a new buyer will be put off from the purchase because the lien will cloud the title and not allow the new owner to dispose of the property without first paying off the lien. The way to make sure your property is lien free is to pay the debt associated with the property before selling, and in the case of your house that is usually done by paying the lender the sales proceeds at closing. But there are other ways liens can attach to your home, and it is just as important to know about those as it is to understand how your mortgage works.
One of the most common ways a lien attaches to your home, that is not the mortgage, is by being sued by another lender. If you are sued for a debt and a judgment is entered, the prevailing creditor can reduce the judgment to a judgment lien and record it against your home. One of the good things about bankruptcy is that your creditors are no longer allowed to harass you. But another benefit of a bankruptcy filing is that if a lien impairs one of your exemptions, it can be eliminated. This is how it works:
- You are given certain exemptions when you file bankruptcy, and one of those is your home. What this means is that creditors are not allowed to take your home, up to the exempt value. This benefit protects the family home and allows you to keep your house, as long as you continue to make the payments.
- If a lien has attached to your home, other than the mortgage lien, it is said to impair your homestead exemption. In order to have that lien removed, and keep your exemption safe, you can seek to have the lien removed.
The law of bankruptcy exemptions and liens is complicated, but we can break it down for you in easy to understand terms. Call us today to find out how to safeguard your assets in your bankruptcy.
For more information about bankruptcy, contact us at www.DsouzaLegalGroup.com. We will explain how the process works and make sure you are comfortable before proceeding.