If you are considering bankruptcy and are worried about liens on your property, one of our experienced bankruptcy attorneys in New Jersey can explain the different bankruptcy chapters and how Chapter 13 bankruptcy specifically can aid homeowners facing either imminent or existing property liens.
What is a property lien under New Jersey law?
A property lien is a judicial tool with which unsecured creditors can seek to protect their right to obtain payment for debts they are owed by asserting a right to a portion of the equity in the debtor's home or other property. For this reason, these types of liens are often referred to as second (or even third) mortgages on the property, since their interest remains second to the mortgage holder, who is a secured creditor.
Because there is no property securing the debts that unsecured creditors are owed, a lien against a debtor's property can help increase the chances of the payment being received—especially if the debtor plans to sell the property or apply for a loan modification—unless the debtor is able to avoid the lien through bankruptcy proceedings.
How can a Chapter 13 bankruptcy help New Jersey property owners with liens?
Bankruptcy is the only legal process by which a property owner can avoid paying liens that are owed. Not all types of property liens can be discharged during Chapter 13 proceedings. However, the bankruptcy system provides certain exemptions, which may allow a debtor to exempt the equity value in his or her home. In this instance, your experienced bankruptcy attorney would be able to pursue “avoiding,” or stripping off, the lien that impairs the bankruptcy exemption, to the extent that the lien is greater than the value of the home. The lien would then be treated as void, so long as the debtor completes the Chapter 13 Plan and obtains a discharge.
How can a New Jersey bankruptcy attorney help with property liens?
Property liens are not automatically discharged during or after a Chapter 13 bankruptcy. Your experienced Chapter 13 bankruptcy attorney must timely file a motion to avoid the lien(s). Otherwise, the lien will survive your bankruptcy and you will still owe that debt to the lienholder.
Consult an experienced Chapter 13 bankruptcy attorney in New Jersey
In addition to seeking the release of your existing property liens, your experienced bankruptcy attorney can also assist in determining whether you may have any liens filed against your property of which you are not currently aware.
No matter how many liens your property may be subject to or what the value of the lien interests may be, one of our experienced New Jersey Chapter 13 bankruptcy attorneys can help you protect your assets while discharging your debts. Contact us today for help with your New Jersey bankruptcy.