Bankruptcy is a process in which debtors either give up assets or reach a payment plan in order to pay off creditors, with the ultimate goal of discharging all qualifying debt. There is a lot of hard work and emotional energy that goes into accomplishing this feat. When the dust settles after a bankruptcy court discharges a person’s debt, they may feel a great sense of relief.
Unfortunately, some people get a rude awakening following their discharge: that there is still a lien on their property.
What is a Lien?
A lien is a secured interest in property that gives the holder of the lien the legal right to take possession of the property if the debtor fails to satisfy his or her debt. One common type of lien is one that comes about by agreement when people take out significant loans. This may include home mortgages or auto loans, in which the borrower agrees to offer the house or car as collateral for the loan. In other words, the lender retains the right to foreclose or repossess the property to satisfy any outstanding obligation.
Another common type of lien-and one that we frequently see in the context of bankruptcy relief-is a “judgment lien”. A judgment lien is a different type of lien in that the underlying debt is usually unsecured. In order to obtain a judgment lien, a creditor must file a lawsuit and obtain a judgment against a debtor. Then, the creditor must take that judgment and file it with the proper clerk in the county where the debtor owns real property. Once perfected, this judgment lien entitles the lien holder to payment when the debtor sells titled property in that county.
Why Would a Lien Survive Bankruptcy?
A lien and a debt are separate concepts that are treated differently under the law. While a debt may be discharged in bankruptcy, a lien is not automatically discharged and can remain after the bankruptcy case closes. This means that after all of the time, energy, and expense of obtaining discharge through bankruptcy, you may find yourself unexpectedly tethered to a pre-existing lien.
This is why it is so important to have a bankruptcy attorney and to fully disclose any pending lawsuits or judgment liens that are out there. There are steps that an attorney can take to tackle these liens. Failure to adequately address liens during bankruptcy proceedings will ultimately be time consuming and expensive, and may require you to pay a fee to reopen your bankruptcy case.
You Need an Attorney to Defend Your Legal Rights
Bankruptcy can provide you with great peace of mind and a sense of relief. However, it is critical that you and your attorney adequately address liens, otherwise they may haunt you beyond the discharge of your debt. At Levitt & Slafkes, P.C., our attorneys have successfully obtained bankruptcy relief for our clients for a matter of decades. With our experience and vast knowledge of the law, we make sure that your bankruptcy is handled right and that you get the relief you deserve. Contact our office by telephone at (973) 323-2953 to schedule a consultation, or contact us online.