How to Deal with Liens During Bankruptcy in Maryland
Dealing with liens during bankruptcy in Maryland can be a complex process. Understanding the implications of liens is crucial for anyone filing for bankruptcy. In this article, we will explore the various aspects of handling liens when declaring bankruptcy in Maryland, ensuring you're well-informed and prepared.
Understanding Liens in Bankruptcy
A lien is a legal claim on an asset that gives the lienholder the right to possess the property until a debt owed by the property owner is discharged. When filing for bankruptcy, your liens must be addressed as they can significantly impact your financial recovery.
Types of Liens
There are several types of liens that may affect you during bankruptcy:
- Secured Liens: These liens are backed by collateral, such as a mortgage on a home or a car loan. They allow lenders to seize the asset if payments are not made.
- Judgment Liens: These are placed on property after a court judgment, usually as a result of a lawsuit. They can hinder the sale or refinancing of real estate.
- Tax Liens: These are imposed by the government for unpaid taxes and can also complicate your bankruptcy case.
Steps to Take When Filing for Bankruptcy with Liens
When filing for bankruptcy in Maryland, follow these steps to effectively deal with liens:
1. Determine the Type of Bankruptcy
Most individuals will choose between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 involves liquidating non-exempt assets, while Chapter 13 allows for a repayment plan. The type of bankruptcy you file will influence how liens are handled.
2. List All Liens in the Bankruptcy Petition
When you file for bankruptcy, it’s essential to list all liens on your bankruptcy petition. This includes the type of lien, the amount owed, and the corresponding property. Failing to list a lien may result in it remaining enforceable after bankruptcy.
3. Identify Exemptions
Maryland allows for certain exemptions that can protect your assets from being sold in bankruptcy. Understanding which assets are exempt and how they relate to your liens is vital. For instance, if a property has a lien but is fully exempt, you may retain ownership after bankruptcy.
4. Consider Lien Stripping
In Chapter 13 bankruptcy, you may have the option of lien stripping. This process allows you to eliminate junior liens (such as second mortgages) if the property’s value is less than the first mortgage. This can significantly decrease your total liability.
5. Discharge of Debts
While bankruptcy can discharge unsecured debts, it typically does not eliminate secured liens. However, if a lien is associated with a debt that is discharged, the lien can often be removed through the bankruptcy court.
Consult a Bankruptcy Attorney
Navigating liens during bankruptcy can be overwhelming. Consulting with a qualified bankruptcy attorney in Maryland who understands state laws and the implications of liens can make the process smoother. They can provide tailored advice, help you understand your options, and represent you in court, if necessary.
Conclusion
Handling liens during bankruptcy in Maryland requires careful consideration and a clear understanding of your rights and options. By knowing how to approach each type of lien and following the necessary steps, you can protect your assets and move forward towards financial recovery. Remember, professional guidance can be invaluable in this challenging process.