Avoiding Liens under Chapter 7 Bankruptcy

If you are considering filing a Chapter 7 bankruptcy, it's probably because you want your debts discharged.  The general rule in bankruptcy is that liens are not discharged.  However, certain liens can be discharged if they are avoided.  So, how do you avoid a lien then?

Some of the possible ways are:

File a motion to reduce or eliminate

You can file a motion to have your liens reduced or eliminated.  However, the lien must be either a "judicial lien" or a "non-possessory, non-purchase money security interest" to be avoidable.

Surrender your property

Another way you can avoid the lien is by surrendering the property.  You must list the property on the "Statement of Intentions" form (a copy must be sent to the creditor).  If the creditor fails to pick it up within 30 days of the creditors' meeting then the property will be "abandoned," in which case it is yours to keep.

Redeem your property

You can also avoid your lien by reducing it through redemption.  You will have to pay the creditor what the property is worth rather than what you owe on the debt.  The downside here is that you must pay the creditor within 30 days of creditors' meeting.

If you have any questions about bankruptcy please call 1st California Law at (949) 735-8499 for a free attorney consultation.

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