Bankruptcy always discharges unsecured debt such as credit cards, medical bills, and payday loans. However, “liens” usually survive bankruptcy.
So, you ask, “What the heck is a ‘lien?’” A lien is simply a debt linked to specific property owned by the debtor. A mortgage debt can be chained to your home, requiring you to pay the lien, or risk losing your home or the equity in your home, when you sell. Even if you have filed bankruptcy, you must continue to make the loan payments to keep the home.
Here’s the good news: There are exceptions! A bankruptcy filer can sometimes discharge the debt and erase the lien. Read on to learn when you can have your cake and eat it too.
- A “judgment lien” can be erased in bankruptcy.
After a collection agency obtains a judgment in county court, they will often then transfer the judgment to district court. By doing this, the judgment becomes a lien on real estate owned by the debtor. This lien would have to be paid in full if the debtor tried to sell the house. However, if the debtor files bankruptcy, and has lived in the home, a special motion (“Motion to Avoid a Lien”) can be filed with the bankruptcy court to erase this lien. As a result, the debt is completely gone, and the debtor has no obligation to pay that creditor
Don’t make the costly mistake of confusing “loans” and “liens” in bankruptcy. A significant amount of money can be saved by the bankruptcy filer who understands the difference, and takes advantage of the opportunity to erase these types of liens.
How Our Nebraska Bankruptcy Attorneys Can Help You!
If you have questions about removing judgment liens in bankruptcy, please contact the Nebraska bankruptcy lawyers and staff at Steffens Law Office. We have over 50 years combined experience in debtor/creditor law, and are dedicated to helping you protect your property from creditors.