Common Court Liens Associated With Bankruptcy

Court liens occur when a debt involving property is taken before the court, and a judge uses a court order to secure the rights of the creditor in the arrangement. A lien in general is the legal claim the creditor has against the property or asset, and in cases where the borrower is behind on payments, the creditor may choose to get a court judgment that results in a lien. This helps cover their rights should the borrower continue not to pay, and can result in garnishment of wages or repossession of the property.

Understanding the Rules for Court Liens and Bankruptcy

If you’ve got a court lien against you, chances are it’s a major financial stress. Maybe you fell behind in your car payments and your car was repossessed, or your mortgage is very overdue and your wages are being garnished. Maybe your home is even being threatened by foreclosure. The common question as people struggle with these situation is: what will happen if I file for bankruptcy? Will it help?

The answer, in most cases, is yes. Frankly, these types of court liens are the reason many people file for bankruptcy.

• Either Chapter 13 or Chapter 7 will stop wage garnishments on any further wages earned after the filing. This can be vital to someone who needs their whole paycheck to get by, so a wage garnishment might very well be the trigger that sends a debtor to the filing office. 
• A bankruptcy filing, if done immediately after repossession, can even possibly get your property back, although there are no guarantees. The important thing is that it can stop the problem from escalating, so if you’re on the verge of losing your home to foreclosure, or struggling to get by because of the garnishment of your check, it might be time to act.

The bankruptcy itself, whether Chapter 13 or Chapter 7, will either manage or erase the debt for you, meaning that you’ll come out without the court lien hanging over your head. The exception to this rule is when your lien is due to income tax money owed. No bankruptcy will erase tax liens; because they’re different from liens attached to property and assets, they’re handled differently by the court. The bankruptcy can, however, assist you with repayment arrangements for a tax lien.

Getting Help

Bankruptcy is a big decision, and it’s not the perfect solution – it has its own set of consequences for your financial future. But liens are serious and can be devastating if they result in the loss of important property or wages that you can’t afford to lose. If you’re buried in court liens and judgments, bankruptcy might be an option to explore. If so, it is important to get the advice of an experienced bankruptcy attorney who can help you to decide how best to proceed given your financial situation.