Does bankruptcy eliminate liens?

Yes, bankruptcy can eliminate liens. Bankruptcy law in Maryland allows debtors to discharge their debts in order to gain a fresh financial start. When someone files for bankruptcy, the court issues an order called a stay which stops creditors from taking any action against the debtor. This includes a lien, which is the legal right of a creditor to take property that is owned by a debtor to satisfy a debt. When a Chapter 7 bankruptcy is filed, it can eliminate a lien on the debtor’s property as long as the court agrees that it is a lien that can be removed under the law. In other words, a lien only is dischargeable if it was not created after the debt was secured by the lien. If the bankruptcy court agrees that the lien can be discharged, the property from the bankruptcy estate is sold, the proceeds are used to pay off the lien, and then the debtor is no longer liable for the debt. If a Chapter 13 bankruptcy is filed, the lien still remains on the debtor’s property, but the debtor is allowed to re-pay the debt usually over a 3-5 year period. In some cases, the lien may be modified or even removed altogether if the creditor agrees. In any case, bankruptcy law in Maryland is designed to protect debtors against creditors and eliminate the burden of debt. Bankruptcy allows debtors to be free of a lien and regain control of their finances.

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Does bankruptcy eliminate liens?

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