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Understanding lien avoidance

The primary concern of most of the clients with whom we at the Law Office of Paul Petrillo assist in filing a Chapter 7 bankruptcy is what assets they are allowed to keep. In most cases, you are able to keep your home and most of your personal property. Yet what if a creditor has filed a lien against one of these assets? Simply filing for bankruptcy does not automatically invalidate the lien. Rather, you need to file a lean avoidance motion with the court.

Before considering this, it is important that you understand which types of liens can be avoided through Chapter 7 bankruptcy. Non-possessory liens can be taken care of through your bankruptcy, as can any imposed through a court judgment. However, consensual and statutory liens do not qualify for avoidance. Furthermore, you must be able to file an exemption against the equity that you have in the property. You also need to show that the lien against it restricts you from accessing that equity.

If you do have a lien that qualifies for avoidance, then you must obtain a court order to have that discharged through your Chapter 7 case. The United States Bankruptcy Court for the District of New Hampshire states that the lean avoidance motion form to be filed with the court must contain the following information:

  •          The value of the property in question.
  •          Contact information for the lienholder.
  •          The amount of the lien.

The creditor has the right to object to your petition, in which case you’ll have to have a hearing. However, if no objection is made and your motion is filed appropriately, the court may grant your request without needing to meet with you.

Further information on discharging debts through bankruptcy can found by browsing through our site. 

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