A lien is a claim that a creditor makes against some piece of your property, which is referred to as the collateral for the loan. That is, it ensures payment to the creditor, in the event that you cannot meet the payments required. In real estate, a mortgage lien is a specific kind of lien that’s purpose is to gain repayment for a purchase or home equity loan.
A home could be subject to any number of liens, including tax liens, judgment liens, second mortgages, third mortgages, and so on). In the even that the required payments are not made, the creditor has the right to take the collateral (your house), which is called foreclosing, in order to pay off the loan. Bankruptcy can be temporarily forestalled, by filing for Chapter 7 bankruptcy. Chapter 13 bankruptcy stops foreclosure, provided that your repayment plan involves paying off the arrearages and both the intent and ability to make payments on time while your bankruptcy case lasts.
Though the conclusion of your bankruptcy case will probably result in the discharge of your liability to repay judgments and debts, it does not automatically eliminate liens. Failure to eliminate liens will give the creditor the ability to foreclose on your property and sell it. There are several ways to potentially retain your property:
-Avoid a Lien- This involves getting a court order which declares that the property is free from s specific lien that is encumbering it.
-Redeem the Collateral- This involves paying a secured creditor the value of the property. This makes sense if the property value is less than the amount due because of the loan.
-Reaffirmation of the Debt- The is an agreement between the debtor and creditor, in which the debtor agrees to pay all or a portion of the debt owed, even though he or she is filing for bankruptcy. The individual keeps his or her property and as long as payments are made, the creditor agrees not to take the property.
-Surrender of the Property- This means giving up the collateral (property) to the lender, and avoiding the hassle of the foreclosure sale.