When you file for bankruptcy there is an automatic stay put on any pending lawsuits or judgments against you thanks to the protection offered by bankruptcy laws in the United States. This means that any debts or judgments against you which are filed while you\’re going through bankruptcy stop immediately, preventing you from having to pay them right now. This includes any pending liens against your property – once the filing is in progress all other legal activity against you stops.
In most cases any judgments brought against you just before you declared bankruptcy can also be dismissed as part of your filing, although you do need to be very careful about assuming that certain judgments brought against you will automatically be dismissed, especially when it comes to a lien on your home.
If lien is placed against your home while you\’re in the process of filing for bankruptcy you can still request that the lien is discharged as part of your filing. In very rare cases creditors can try to stop the courts from discharging such a lien, but most bankruptcy judges will remove the lien against your home regardless. If you have a large amount of equity in your home the discharge of the lien could fail because the bankruptcy trustee might need to use the equity in your home to pay off your debts.
However any lien which existed for several months before you filed for bankruptcy won\’t be discharged as part of your filing. This means that when your bankruptcy case is complete the lien which existed against your home several months beforehand will still exist in the future. Only liens which have attached themselves recently might be discharged by the court, but existing liens will not. This normally happens because most liens against a home are put in place by the IRS for non-payment of income taxes.
There\’s also the situation where people deliberately run up debts, including not paying their taxes, in the hope that a bankruptcy court will simply discharge every single cent of their debt. These same people don\’t understand that is the function of the bankruptcy court to discharge your debts in a discretionary manner, but a lien against your home which existed for up to 90-days before you filed for bankruptcy isn\’t going to be discharged, except in the most exceptional of circumstances.
So if you find yourself in a position where a creditor is just about to take a judgment against you, placing a lien on your home in the process, within the next 90-days it\’s absolutely critical that you contact an experienced bankruptcy attorney as soon as you possibly can. Doing this ensures that any lien brought against you within that 90-day period can usually be discharged as part of your bankruptcy filing.
Never assume that an existing lien is discharged as part of your bankruptcy filing because in many cases they\’re not, and this is not something you want to discover several months after you think you\’ve discharged all of your debts. If a lien exists before you file for bankruptcy then it will probably exist after you file for bankruptcy because it was never included in the filing itself. The only way to remove a lien of this type which exists on any property after your bankruptcy case is to file a specific application either in the State Court or the Bankruptcy Court.
If you need further advice on the above please seek the assistance and guidance of a bankruptcy lawyer and/or bankruptcy specialist. Ever case is different, as are the circumstances for the lien being placed on your property in the first place.