Bankruptcy & Liens

A lien occurs when a creditor has a secured interest in your property. There are many types of liens, but the most common are liens on a home or car. All secured debts involve liens attached to a specific piece of property or collateral that guarantees payment for the debt you owe. If you default on the loan, this lien gives the creditor the right to repossess the property.

If you have a property with a lien and you are considering bankruptcy, it’s important to consult with an experienced bankruptcy attorney in Las Vegas to understand how the lien can affect your property in bankruptcy.

What Happens to a Lien in Chapter 7?

Every secured debt has two components that are treated differently in bankruptcy.

Personal Liability

While Chapter 7 bankruptcy can erase your personal obligation to pay a secured debt, the lien will survive bankruptcy. Bankruptcy is designed to remove your personal liability for debts and give you a fresh financial start, assuming the debt qualifies for discharge. This means that creditors cannot sue you or attempt to collect on debts discharged in bankruptcy.

Lien or Security Interest

In addition to your obligation to pay, a creditor has a legal claim or lien on the collateral in question. This security interest gives the creditor the right to repossess the property or force the sale of the property if you do not pay the debt you owe. When collateral is not available, the lender can sue for the value of the collateral.

A lien remains with the property even if the property is given away or the underlying debt is discharged in bankruptcy. After your Chapter 7 bankruptcy is discharged and you stop making payments, the creditor has the right to repossess but cannot sue you for any deficiency, or difference between the balance of the debt and the value of the collateral, because your personal obligation to pay the debt is gone.

The good news is bankruptcy can give you the ability to eliminate or reduce liens on the collateral.

Contact a Las Vegas Bankruptcy Attorney

Before you file for bankruptcy, it’s very important to identify all of the liens on your assets. It may be possible to negotiate with the lien holder before you file so the lien can be removed from your property. If the lien is not perfected or recorded with the appropriate state or local records office, your loan may be considered unsecured by the court and discharged in your bankruptcy. If the lien does survive bankruptcy, you will need to stay current with your payments to avoid repossession.

Bankruptcy law in Nevada is very complex and it’s easy to make a simple misstep with serious consequences, especially when it comes to liens during bankruptcy. An experienced bankruptcy lawyer in Las Vegas can help you understand how your bankruptcy will affect any liens on your property.

Contact Vegas BK for a free consultation with a bankruptcy attorney to discuss your case and the best course of action to handle any secured property you want to keep.