Lien

How it works

A lien is a right against a piece of property. The creditor who holds one is a secured creditor, and the debt is a secured debt. Home mortgages, auto loans and tax liens are common examples. 1 2

The Bankruptcy Code sorts liens by how they arise. A security interest is created by an agreement. A judicial lien is obtained through a judgment, levy or other legal process. A statutory lien arises by force of a statute. 2

The key point for a person filing bankruptcy: a discharge releases you from personal liability for a debt, but it does not remove a lien by itself. A valid lien that was not avoided in the case remains, and the secured creditor may enforce it to recover the property. 3 4

That is why keeping a financed car in Chapter 7 takes a decision. An individual with secured debts must file a statement of intention that says whether they will surrender the property, redeem it or reaffirm the debt. In Chapter 13, secured debts other than a mortgage on the main home can be rescheduled and spread over the life of the plan. 5 6