Avoiding Liens Through Bankruptcy

The purpose of this series is to answer frequently asked questions about liens and how it affects debt settlement and negotiation. Franklin Debt Relief is not a law firm and the following is not to be considered legal advice. We make no guarantees as to the accuracy of the information herein and you should not rely on it. For information about your situation, please consult with an attorney licensed in your state.

I have a lien on my home from an unsecured creditor. I do not have the income necessary for debt settlement. What option is available to me to get rid of the lien without paying it?

Liens can sometimes be avoided through bankruptcy.

How do I go about avoiding a lien?

By requesting your lawyer to eliminate it through bankruptcy. It is not automatic or required.

How do I know whether I qualify to avoid my lien through bankruptcy?

Whether you can avoid a lien depends on the bankruptcy exemptions in your state, the value of your property, and what you owe on your mortgage(s) or other liens with a higher priority (i.e. tax liens, statutory liens, if any). If your property value is worth less than the bankruptcy exemption (or exempt entirely), the court will allow you to avoid the lien. If the property is worth more than the exemption, the lien will be reduced to the difference between the exemption and either the property’s value or amount of the debt, whichever is less.

What are you talking about?

Consider this example. A creditor has a $500 lien on Harold’s guitar, which is worth $300. In Harold’s state, the guitar is exempt to $200. He could get the lien reduce to $100. The other $400 is avoided.

$500 lien $300=value of item
-$200=exemption
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$100=amount of lien after avoidance