Not all liens are created equal, and fortunately some liens can be avoided in bankruptcy. A skilled Atlanta bankruptcy attorney can identify which liens you can get rid of and which you cannot.
As mentioned in a previous blog, there are various types of liens and debts. Virtually the lowest rung of debt is an unsecured debt. Additionally, the least protected lien for a creditor is a judicial lien.
A judicial lien is created by a creditor obtaining a judgment. A typical example is when a debtor defaults on his credit card debt to American Express, he gets sued. American Express needs a judgment to forcibly collect on the debt. Should it win the lawsuit, AMEX now has a valid judgment.
The next step will vary according to your state law, but most likely AMEX will “perfect” its interest and move from an unsecured to secured creditor. AMEX will do so by recording a lien on the debtor’s property in the debtor’s county of residence.
If the debtor subsequently files bankruptcy, the debtor can most likely discharge the debt. However, the debtor will also want to remove the lien.
To remove the lien, the debtor must file a motion under 11 USC 522(f). The debtor’s ability to do so will be fact specific because it will depend on the debtor’s assets and exemptions.
Should the debtor be able to fully exempt all of his assets, he should be able to completely remove the lien. AMEX will then be left with no debt and no lien. Note that AMEX can challenge the discharge of its debt, but that would be highly unusual.
Note that this process cannot be done on a consensual lien like a mortgage outside of a process called a lien strip. A lien strip is not the same thing as a lien avoidance motion.
Peter Bricks is a member of the National Association of Consumer Bankruptcy Attorneys (NACBA). He is a regular contributor to bankruptcyblog.org has bankruptcy attorney offices in Jonesboro, Cumming, Atlanta and Dunwoody.