Filing for bankruptcy can help wipe out debts. But with a discharge, it can’t instantly erase the liens the creditors have on your property. Therefore, even if your case is successful, you could still lose the property you thought you wouldn’t lose. That’s where you’ll need the help of a Baltimore bankruptcy lawyer.
Creditors who have a lien on your property still have rights to it. Fortunately, there is a way to keep your property even if that’s the case, which is by filing a Motion to Avoid Judicial Liens. But how can you avoid them?
Motion to Avoid Judicial Liens
It is a motion that your Baltimore bankruptcy attorney can file in the court to dislodge an involuntary judgment lien from your property once the bankruptcy is completed. This process causes the creditor who sued a judicial lien on your property to lose legal interest after the completion of your bankruptcy.
How to Avoid Judicial Liens
Filing for bankruptcy is meant to be a fresh financial start for you. However, if your creditor still has an interest in your property, it invalidates the purpose of it. Which is why, it’s important to do some research on whether you can file for a Motion to Avoid a Judicial Lien to be able to restart your finances.
So to avoid a judicial lien, you’ll need to meet specific bankruptcy requirements. Chapter 7 and chapter 13 bankruptcy’s requirements differ:
Chapter 7 Bankruptcy
If you have successfully filed a Motion to Avoid a Judicial Lien, you may be able to remove a judicial lien in Chapter 7 bankruptcy as long as your property has these characteristics:
- You should have a judicial lien, which was placed on your property when the creditor was suing you for an unpaid loan. It shouldn’t be a voluntary lien or an involuntary statutory lien.
- The lien shouldn’t be a result of alimony obligations or child support.
- The lien should be incompatible with a bankruptcy exemption; you can take this under federal laws or the laws of Maryland. These exemptions allow you to protect the property or the property’s equity from liquidation in Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
Compared to Chapter 7 bankruptcy, removing liens in Chapter 13 bankruptcy is somewhat easier. In Chapter 13, there are two main methods for you to avoid liens:
- Cramdowns
An auto loan is the most common debt that debtors usually cram down. And cramdown is a type of lien avoidance specifically for other types of property, such as vehicles. Therefore, this might not work for your residence that has a lien. This process reduces the amount of debt you have to the value of the vehicle that secures the debt.
- Lien Stripping
For real estate liens, lien stripping is the best option for you. If you have a junior lien (2nd mortgage) on your home that is less than the 1st mortgage owned, it’ll make the 2nd mortgage unsecured. This will enable you to pay it with your unsecured debts in Chapter 13 repayment plans.
To those who file Chapter 7 and Chapter 13 bankruptcy, judicial liens are the most common obstacles that need to be overcome. So, make sure that you are seeking help from a highly experienced bankruptcy lawyer in Baltimore, Maryland such as Richard J. Hackerman. For legal concerns such as avoiding a judicial lien, you can reach us by calling 410-243-8800/888-243-5500.
