If you’re filing Chapter 7, your goal is to remove as much of your debt as possible. This action becomes more complicated when liens are attached to pieces of property. Generally, a bankruptcy filing doesn’t automatically remove a lien. The law gives you more options for ‘involuntary’ liens in a bankruptcy filing, but ‘voluntary’ liens, such as home mortgages and car loans, will usually remain intact after the bankruptcy.
‘Avoidable’ liens
Bankruptcy laws allow a debtor to remove certain liens from property. Though the term for these types of liens is “avoidable,” they require legal action to remove them in a Bankruptcy Court. Here are some scenarios where your liens might be avoidable:
- The property is your homestead: Homestead protections in Florida (a provision of the Florida Constitution) are some of the strongest in the country. The homestead must be the debtor’s primary residence to qualify.
- The lien is classified as a judicial lien: This goes back to the distinction of an involuntary lien. A judicial lien is any lien that is ordered by a court’s judgment via a lawsuit or some other legal proceeding.
Exceptions to homestead protection
The exceptions to avoidable liens in Florida under the homestead exemptions include voluntary liens placed to secure a loan like a mortgage on your home, mechanics liens for goods and services for that home, liens recorded before the home’s purchase to secure homeowner’s association dues, and tax liens.
Filing Chapter 7 is complicated enough without the addition of liens to property and assets. Contact a knowledgeable bankruptcy attorney to determine what kind of debt is eligible for removal in your bankruptcy filing.