Many debtors who are filing for Chapter 7 or Chapter 13 bankruptcy have one or more liens on their personal assets.
The most common questions about liens during bankruptcy are:
- What is a lien?
- Can filing bankruptcy get rid of a lien?
To answer the first question, a lien is a legal interest of a creditor in a particular asset. For example, a lender who has loaned a debtor money to buy a car, has a lien on the vehicle. Filing bankruptcy does not remove any existing liens (including a lien on a car) unless the judge orders the removal of a lien. But, what a bankruptcy will do is eliminate the debtor's personal responsibility to repay the loan/debt. In the case of a car, the lien holder can still repossess the vehicle after the bankruptcy has been discharged; but the lien holder cannot force the debtor to pay any of the remaining loan balance before or after the car has been auctioned.
If you have a lien against your wages or a bank account contact a bankruptcy attorney to find out what actions, if any, can be taken to negotiate the removal of these liens.