Anyone struggling to meet monthly debt payments has more options than just slipping deeper beneath the water of financial difficulties. Instead of facing the stress of debt and the emotional toll it creates, those working through financial troubles can find relief within the government sanctioned process of bankruptcy.
If you think bankruptcy might be right for your financial circumstances, Behm Law Group, Ltd. can provide professional guidance and support. When you choose to file for bankruptcy in Waseca, MN, as an individual or business, you can gain the benefits of a debt treatment process that will lift the stress of a heavy financial burden.
When you file for bankruptcy, you may have many different types of debts to your name. Broadly speaking, the types of debts included in the bankruptcy process are generally secured and unsecured. Your secured debts are tied to or secured by an item of property or real estate, and it’s almost certain that the property or real estate will have liens attached to them.
Liens are tied to property loans like mortgages, car loans, and other commonly secured debts that are arranged through lending companies. These liens give the lenders the right to repossess or foreclose on the properties tied to the debts until the debtor pays the debts or the debts are discharged. In the bankruptcy process, mortgage liens can be stripped or avoided, depending on the situation.
Lien Avoidance in Chapter 7 Bankruptcy
When you file for Chapter 7 bankruptcy, you’re entering into a liquidation process that works to provide your creditors the value of your non-exempt property in exchange for debt relief. You can protect your properties from liquidation with your available bankruptcy exemptions, however. If there was a lien on a piece property, claiming the exemption is not considered lien avoidance. Your available bankruptcy exemptions allow you to protect the equity – the value of an item of property above the debt you may owe against it – in your property. Sometimes, you can avoid a creditor’s lien in full or in part regarding a certain piece of property and use your bankruptcy exemptions to protect the equity you gain from such lien avoidance. In order to avoid a lien on property, a secured creditor’s lien must be a non-purchase money lien. This means that the creditor did not give you any financing for the purchase of the subject asset itself. For instance, if a creditor gives you a loan for home improvements and you give that creditor a lien or security interest in your furniture or a vehicle, farming equipment or some other assets, that creditor has a non-purchase money lien as to those items because it did not give you a loan to purchase them. Rather, the creditor gave you a loan for some purpose that was completely unrelated to the assets on which you allowed the creditor to have a lien. Presume that One Main Financial gave you a $10,000.00 loan for home improvements and further presume that you granted it a security interest in your furniture, appliances, and your car. In a bankruptcy proceeding, you could avoid the entire $10,000.00 lien on those items and use your bankruptcy exemptions to protect the resulting $10,000.00 equity you would then have as a result of having avoiding the lien.
Lien Stripping in Chapter 13 Bankruptcy
If you file for Chapter 13 bankruptcy, your debts are reorganized into a manageable repayment plan lasting three to five years. If you have multiple mortgages on your property, you may be able to strip off second and third mortgage liens, if there is no value or equity to the real estate above and beyond the first mortgage. If the amount of the first mortgage is greater than the value of your home, you’re considered “upside down” on that mortgage debt, and you can strip the junior liens away.
To learn more about the different types of bankruptcy chapters and how your liens are handled when you file for bankruptcy in Waseca, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.