Liens Survive Bankruptcy Discharge
By Cathy Moran, California bankruptcy lawyer on May 21, 2007 in Debts Not Dischargeable, General Bankruptcy Information
More confusion is generated about the effect of bankruptcy and the scope of the discharge when a basic tenant of bankruptcy is overlooked: liens on the debtor’s assets pass through bankruptcy unaffected by the discharge.
The discharge eliminates the debtor’s personal liability for a debt. Where a debt is supported by a lien as well as the debtor’s personal liability, such as a car loan or a real estate mortgage, the lien on the property continues after bankruptcy.
After a discharge, the creditor is limited to foreclosing on the lien and recovering the property that is collateral. The discharge prevents the creditor from suing the debtor for any shortfall upon the sale of the collateral.
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