Different Kinds Of Liens On Property In Bankruptcy

In North Carolina, to have a mortgage someone would have given the creditor a “Deed of Trust” which is not broken by the bankruptcy. To obtain a car loan, creditors normally put a lien on the title to the car. The collateral given to creditor makes the loans “secured.” To keep houses and cars through bankruptcy, those loans normally need to be paid in full, although in some circumstances, less may be paid. In Chapter 7, borrowers may have to sign a reaffirmation agreement to keep the property, depending on the particular loan. A reaffirmation is like a new contract, and legally re-obligates the debtor on the debt.

If someone was sued, a creditor may have a “Judgment Lien” against the debtor. The judgment lien is recorded and may have attached to real property owned by the debtor. All judgments should be listed in the bankruptcy petition. Judgments should be dealt with during the bankruptcy case to avoid problems later. These are usually done with the filing a Motion to Avoid Judgment Lien to remove the judgment from real property.

Some creditors have a lien on consumer goods purchased from a creditor, like furniture, appliances, electronics, or jewelry. Creditors often hold what is called a “Purchase Money Security Interest” in consumer items purchased from it’s store, if they have the proper documentation and if they also financed the purchase. If a creditor holds a purchase money security interest in collateral, they may be legally entitled to get the items back if they are not paid for.