The Basics of a Property Lien and What To Do
If you are considering filing for bankruptcy, it’s important to understand how property liens are handled in the process. Although bankruptcy does not automatically remove a lien on property, it does provide you with options for dealing with it.
Learning about the law before you file can help you determine if bankruptcy is the right solution for your financial situation. A qualified attorney can carefully explain your rights and what options exist under current bankruptcy law that could help protect your house and other assets.
What is a Property Lien?
If you do not know the lien meaning, you may be wondering ‘what is a lien?’ It is a legal claim placed on a piece of real estate such as a house by a creditor in order to secure payment for a debt. It is important to understand that it gives the creditor the right to take ownership of the property if the debt is not paid.
Property liens are an important tool commonly used by banks and other lenders when they lend money for the purchase of real estate. They can also be used by contractors, suppliers, or other creditors who have provided goods or services to a homeowner and have not been paid, or government creditors for unpaid taxes or child support.
Types of Liens
There are important distinctions between the categories of liens. In general, there are three basic types: consensual, statutory and judgment.
A consensual lien is established when two parties agree to create it in order to secure payment for goods or services. A common example of this is when someone takes out a mortgage loan.
A statutory lien occurs by operation of law rather than through an agreement between two parties. For instance, mechanic’s, child support, and tax liens are all created statutorily.
Finally, judgment liens are created when one party wins a lawsuit against another for unpaid debts. The court can put one on the losing party’s house in order to secure payment to the other party.
What To Do if You Have a Lien Against Your Property
In most situations, if a creditor obtains a lien against your property, the only way to remove it is to pay your outstanding balance.
To successfully clear it from your house, you must take action in order to satisfy the debt. However, in some instances, you may be able to negotiate with the creditor to remove it before you have fully paid it off. Likewise, if it is invalid, you request a court order to eliminate it.
Bankruptcy may also allow you to remove one from your house in certain circumstances, but it’s important to understand that there are limitations on when filing can help.
How A Lawyer Can Help for Your Property Lien
If it is not legally valid, a qualified attorney can help you get a court order removing it. Likewise, a lawyer can help you determine if filing for bankruptcy can help protect your house.
Although filing for bankruptcy does not automatically eliminate a lien, in some situations, an attorney can help you "avoid" it through a court order. The general rule is that you can avoid a judgment lien on your house if some or all of the equity in your home is covered by a bankruptcy exemption and their execution would prevent you from benefiting from the exemption. However, in some instances, if the equity in your home is insufficient, you may also be able to eliminate second mortgages, home equity lines of credit (HELOCs), or IRS tax liens.
Your ability to avoid it depends on a variety of factors, such as the amount of equity in your home, the state you live in, and the type of bankruptcy you are filing. For this reason, it is important to discuss your circumstances with an experienced bankruptcy attorney who can advise you on the best way to proceed.
Contact DebtStoppers today to sign up for a free consultation with one of our knowledgeable bankruptcy lawyers. We can discuss the important facts in your case and help you decide if bankruptcy is the right choice for you and your financial situation.