What happens to a bankruptcy lien when a judgment creditor removes it?
One of the ways to eliminate a bankruptcy lien is by satisfying the debt in full. This includes all costs incurred during the judgment process, including interest and fees. It is also possible to set up a payment arrangement. If you are not sure what to do, you may want to consult with a debt settlement attorney. An experienced attorney may be able to negotiate a lower payoff for you.
Using a security interest
When filing for bankruptcy, it is possible to use a security interest to remove a bankruptcy-related lien on collateral. This is an agreement between a creditor and a borrower that satisfies certain legal requirements. The agreement must be recorded at a state or local records office. For example, a mortgage holder must record their lien at the county recorder's office.
A security interest is a legal interest that allows a creditor to sell collateral as a way to recover its money. It also lets the creditor repossess the property, force the sale of it, or sue for the value of the collateral. A lien is attached to the property even after the debtor has given the property to another party. In other words, a security interest does not disappear with bankruptcy.
A nonpurchase-money security interest arises when a creditor advances money to a debtor and takes a security interest in the debtor's personal property. This type of security interest can affect a debtor's household goods exemption.
Using a cramdown to avoid a bankruptcy lien
If you have a first mortgage and have recently filed for bankruptcy, you may be able to use a cramdown to reduce the principal balance and interest rate of the loan. This method may be available for a variety of different types of liens, including car loans, certain real estate loans, and personal property loans. There are certain criteria that must be met before a lien can be removed, however. First, the lien must have been obtained at least 910 days prior to the filing of bankruptcy. Second mortgages may also be eligible for a cramdown.
A cramdown is a process in which a filer pays off a secured debt through a Chapter 13 repayment plan. During this process, the filer pays off only the value of the collateral, reducing the total amount owed. The remaining debt is then discharged. This method is usually effective for car loans, as the borrower will still have a free and clear title to the vehicle after the Chapter 13 plan has been completed.
If you have any questions, you can get a free consultation with Ascent Law LLC:
Ascent Law LLC:
8833 South Redwood RoadSuite C
West Jordan, UT 84088
(801) 676-5506
