Dealing with liens is a popular topic for any Ohio Bankruptcy Law Firm, and the answer to how they are handled in bankruptcy may surprise you. When you file for Chapter 7 bankruptcy, several liens will survive the process, meaning even if the debt is discharged the lien will remain in place. Having a lien on your property means that in some instances the creditor can force the sale of your property or prevent you from selling it yourself without paying back the debt.
How Liens Occur
Liens can occur in several different cases. When you take out a mortgage, your lender will place a secured lien on the property to ensure they are paid back. If you fail to pay your mortgage, the bank will have the ability to force a foreclosure sale of your property (the collateral) in order to acquire their money back. Additionally, liens can occur because of a judgment against you from a credit card company or other lenders. Another type of lien, known as a mechanical or contractor lien arises when you have someone perform work on your home but fail to pay them in full. Tax liens can also be issued if you fail to pay your federal taxes.
How to find out if you have a lien on your Property
Because liens must be “perfected” or recorded with state and local offices, you can easily find out if you have a lien on your property by inquiring with your county clerk or records office. If a lien is in place, the county clerk or assessor’s office will have it on the public record. Many counties in Ohio and other states have online portals that will allow you to find out. Contact your local county clerk office to find out the URL of their public record search.
Dealing with Liens in Bankruptcy
Your ability to eliminate liens in bankruptcy depends primarily on how much equity you have in your home. If your mortgage is higher than the home’s value, it is possible to “strip” or wipe out judicial liens arising from being sued for a debt. The same holds true from most consensual liens, such as second mortgages, assuming you have no equity in the home. Other liens, such as statutory liens arising from local, state, or federal taxing authorities cannot be eliminated using bankruptcy and must be paid back in order to have the lien removed. If you have recently had a second lien placed on your home, contact a bankruptcy attorney on how to proceed with removing a lien using bankruptcy or to protect yourself from losing your home due to excessive debt.