Lien Avoidance in Bankruptcy, Part One

Guest Blogger  Russell A. DeMott, a Charleston, South Carolina bankruptcy lawyer who helps clients file Chapter 7 and Chapter 13 bankruptcy, begins his series today.

Lien Avoidance in Bankruptcy (Part One)

The Bankruptcy Code allows both judicial liens and liens on household goods to be “avoided,” that is, removed from your property.  In this three-part series, I’ll explain liens and how your bankruptcy lawyer can get them avoided. The Bankruptcy Code is federal law, so this applies to people in New Mexico just like it does with the clients I see in my Charleston, South Carolina practice.

What is a Lien?

A lien (typically pronounced “leen”) is a claim against property for payment of a debt.  There are many examples of liens. The mortgage on your home is a lien.  The security interest your automobile finance company has in your car is a lien.  If you don’t pay your homeowner’s association dues, you’ll have a lien on your property for those unpaid dues.  If you don’t pay the IRS, they’ll put a tax lien on your property.  The same goes for your property taxes.  And in most states, if you fail to pay a contractor—let’s say an electrician—he can put a “mechanics lien” or “construction lien” on your property.

In this series, I’ll not be dealing with these types of liens, however.  I’ll deal with two other types of liens: liens on household goods and judicial liens.

How Does the Bankruptcy Code Treat Liens?

The general rule is this: Liens survive bankruptcy.  That means, generally speaking, if you have a lien on your property when you file bankruptcy, you’ll have a lien on your property after your bankruptcy case is closed.

For example, if you file bankruptcy and have a mortgage on your property, you’ll have one when your case is closed as well.  The same goes for tax liens, property taxes, and other liens.  But this is the general rule!

Why are Liens a Bad Thing?

Liens are bad because if you don’t pay them, you can potentially lose your property.  And, like I said, liens survive bankruptcy.

In “Lien Avoidance (Part Two of Three)” I’ll tell you about judicial liens and how the Bankruptcy Code allows you to remove this type of lien from your property.

Russ also is a Contributing Author at the Bankruptcy Law Network, an ABA “Top 100 Law Blog.” His series continues next week.

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