Charlotte Bankruptcy attorney Bryan W. Stone answers the question: “What are the pros and cons of bankruptcy?”
We have discussed unsecured debts and what happens to these unsecured debts when a person files for bankruptcy protection. But what about secured debts, those attached to items of personal property. In many cases these loans include liens against the underlying property, something that can impact what happens to the items during the bankruptcy process. To find out more about what happens to items that have liens during a bankruptcy, keep reading.
Liens are notices that let the world know you owe someone money. Liens are usually public records that are filed with either local or state level officials. Liens are commonly used for real property such as homes or land, but are not as common for items of personal property like cars or boats.
It’s important to understand that liens are not loans, though the two are related. A loan is just money given to you with a promise to repay that money with interest. A lien is the way that a lender protects his or her interest in that loan. A lien gives the lender a legal right to take back the item of property (either through repossession or foreclosure) if you do not pay under the terms of the loan contract.
How are items with liens collected?
If a creditor has a lien on an item of property and you fail to make payments according to the terms of the contract you signed, that creditor then has the right to repossess the property attached to the lien. This means items like your home or car can all be taken from you if you fall behind on payments.
What happens during bankruptcy?
During a Chapter 7 bankruptcy, where debts are meant to be wiped out, many people are surprised to learn that liens are not eliminated. During a Chapter 7 bankruptcy your personal liability for a debt is erased, which means you are no longer obligated to pay back the creditor.
However, and this is an important however, the bankruptcy does not eliminate liens. Liens can be reduced during bankruptcy and you can try and come to agreements with your creditors to eliminate certain liens, but the bankruptcy itself will not wipe them out.
Given that liens survive the bankruptcy process, if you stop making payments on a piece of property with a lien attached, the lender is allowed to either repossess or force the sale of the property. Though they have the right to seize the property attached to the lien, they cannot later sue you for the difference between what the item was sold for and what you owed because your bankruptcy erased your personal liability for the debt.
If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC today at (704) 370-2828 or find more resources here. As professionals who are experienced in the bankruptcy arena, our attorneys will provide you with the best advice for your particular situation.
About The Author:
Bryan Stone is a Partner with Arnold & Smith, PLLC where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord tenant issues. Originally from Macon Georgia, Mr. Stone attended the University of Georgia for a BBA in Banking and Finance and went on to Wake Forest to earn his law degree. After law school Mr. Stone relocated to Charlotte where he has become quite involved in many local organizations. He is currently the Chair of “Bravo!” the young professionals organization of Opera Carolina, he also founded the UGA Alumni Association of Charlotte. In his spare time he enjoys perfecting his BBQ skills for the annual “Q-City BBQ Championships” and playing softball with the Mecklenburg County Bar Softball League.
“Will Filing Bankruptcy Take Care of a Lien?,” by John Csiszar, published at TheNest.com.
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