There are three basic types of liens and bankruptcy treats each type differently.
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Consensual lien. When buying a home or car you consent to the lender putting a lien on the property, which serves as collateral for payment default. This is a consensual lien.
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Statutory lien. A statutory lien is one created under statutes, such as liens the Internal Revenue Service (IRS) can attach to property based on failure to pay taxes, which is a violation of IRS statutes.
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Judgment lien. Courts award judgment liens when creditors sue for non-payment. An example would be a credit card company lawsuit for default and a court awarded judgment lien for the debt amount. The lien could attach to a bank account or other property.
Judgment liens are the easiest liens to avoid through bankruptcy under 11 USC § 522 - Exemptions (f). In many cases, the lien attaches to property that is exempt in bankruptcy and this makes the lien avoidable. The other two types of liens are often not avoidable, which means you must pay off the debt or lose the property.
Bankruptcy is a complicated legal area and this is an over-simplification of how liens work. It is best to make sure you disclose all the liens you have when discussing bankruptcy with your attorney. Other actions besides avoiding a lien can be taken, and it really depends on the type of lien and circumstances surrounding it.
Consult Harold Shepley & Associates for legal help with liens. We are a Pennsylvania debt relief law firm, and our attorneys offer a free consultation to review your financial situation and advise the best legal remedy. Call 1-866-284-7062 or visit us at www.shepleylaw.com.
