Avoiding liens in bankruptcy is a goal for many of our clients. Many debtors want a financial fresh start after bankruptcy, but a lien can get in the way of this.
Below, we discuss how to avoid liens in Chapter 13. If you need more information or would like to explore your own options for dealing with Chapter 13 bankruptcy liens, you can contact our bankruptcy lawyers in Fort Lauderdale at Loan Lawyers for a free consultation.
How to Avoid a Lien in Chapter 13 Bankruptcy
Florida is one of the leading states for foreclosed properties. To deal with foreclosure, many bankruptcy debtors utilize “lien stripping” to avoid second mortgages, secured lines of credit, and homeowner association liens on their real property. Once a lien is stripped or avoided, the bankruptcy debtor’s personal liability for the obligation is extinguished and the creditor loses the right to foreclose.
Title 11 (the Bankruptcy Code) treats a Chapter 13 bankruptcy filing as a personal reorganization. In a Chapter 13 bankruptcy, debtors utilize a three- to five-year plan to pay mortgage arrearages, mortgage and car payments, and outstanding tax obligations. The debtor’s disposable income, if any, is paid to unsecured creditors.
To strip or avoid a lien, a bankruptcy debtor must:
- Prove that there is absolutely not one dollar of equity in the home, i.e., the balance of their first-position mortgage loan was more than the value of the home on the day the Chapter 13 bankruptcy case was filed.
- Complete their Chapter 13 bankruptcy plan by making all payments (whether 36, 48 or 60) due under the plan.
- Receive a Chapter 13 discharge. If the Chapter 13 case is dismissed or converted to a Chapter 7 case, then the lien will not be avoided or stripped. Instead, it will be reinstated.
Note, that there are some liens that you might not be able to remove on your own, such as a tax lien. A Chapter 13 bankruptcy lawyer can review your circumstances and advise you as to the best options for avoiding liens through Chapter 13.
Contact Our Chapter 13 Bankruptcy Lawyers Today
Reduce stress and the uncertainty that accompanies trying to save your home from foreclosure. The experienced Fort Lauderdale foreclosure defense lawyers at Loan Lawyers are here to help you if you default on a mortgage and your financial position necessitates the consideration of a bankruptcy case filing under Chapter 7, 11, or 13. Our foreclosure defense, debt defense, and bankruptcy law firm has successfully eliminated over $100 million in debt and mortgage principal for our clients. If you require assistance with any form of loss mitigation, contact our office today by calling 954-523-HELP (4357) and see how we can help avoid bankruptcy.
This post was originally published in June 2017 and has been updated for accuracy and comprehensiveness in September 2022.
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Loan Lawyers is made up of experienced consumer rights attorneys who use every available resource to develop comprehensive debt solution strategies. Our goal is to take on those burdens, resolve those problems, and allow our clients to sleep soundly knowing they are on the path to a better future.
