If someone claims bankruptcy and they have a lien on their home, is the lien satisfied?
-- Barbara
A.
The general rule is that a lien survives the bankruptcy unaffected. The exceptions are when the bankruptcy judge enters an order modifying or invalidating the lien.
The most frequent scenario that voids a lien occurs when a judicial lien, such as a judgment lien, impairs an exemption that the debtor would otherwise enjoy. The lien can be invalidated to the extent it interferes with the exemption.
The debtor cannot avoid statutory liens such as tax liens in Chapter 7, nor can voluntary liens be altered. In Chapter 13, however, voluntary liens that are completely underwater can be avoided.
So, the answer depends on the kind of lien, the value of the collateral, and the chapter of bankruptcy involved. An experience bankruptcy lawyer can tell you what your options are.
