Liens Survive Bankruptcy Discharge

by Cathy Moran, Esq.

May 21, 2007

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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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.

Last modified: November 28, 2012