A lien is a legal mechanism that lenders use to secure repayment of an obligation. For instance, when you buy a car the lender will put a lien on the auto until it is paid in full. The lien protects the lender in that if payments are not made, the lender can take action to recover the collateral that was pledged as security for the loan. Liens can also prevent a person from getting a loan, or from refinancing an existing loan. Lenders are hesitant to loan money and take as collateral a piece of property that has a lien in place. The thought of filing bankruptcy as a method to eliminate liens is common, but in practices does not work quite the way most people might think.
Some of the liens you are able to avoid in bankruptcy include:
- Liens that impair an exemption.
- Nonconsensual liens (meaning liens you did not agree to, like a judgment lien).
- Liens for monies loaned on property, that are over and above the value of the property.
In order to have these liens removed, you do have to take some affirmative action in your bankruptcy case; it is not an automatic release of the lien. You have to file a motion asking the Court to enter an order avoiding the lien, and provide a legal reason for your request. If you are successful, you can come out of bankruptcy with liens removed from some of your property. This is beneficial for things like your primary residence, which you may want to refinance some time down the road. If you have been sued before filing for bankruptcy and a judgment was entered, it is likely a judgment lien was recorded against your house. This will make it near impossible to sell or refinance your home without first paying off the lien. But, if you obtain an order avoiding the lien in your bankruptcy case, the lender will have to release the lien and leave your property free and clear (at least as far as their particular lien is concerned). The process can be complex, but with the right bankruptcy and debt management attorney by your side, you can accomplish your financial goals. Call us today to discuss your case.
For more information about how to deal with liens during bankruptcy, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.