Lien-Free Personal Property In Bankruptcy

  • Lien-Free Personal Property In Bankruptcy

Lien-Free Personal Property In Bankruptcy

Call: 888-297-6203

Bankruptcy helps remove lien on your personal property.

1) High-Interest Lenders

Lenders often ask their customers to list their personal properties like Television, Gaming systems, and computers while taking a loan. The loan document contains a grant for the lenders, a security interest in those items. The lender can then repossess these household properties if you fail to pay the loan. Most people don’t hold the ability to fight in these situations financially. A common practice with the lender is threatening the customer with repossession.

2) Lien Stripping Powers of 11 USC 522(f)

A provision in the bankruptcy act helps people who are stuck with these high interest and secured debts exist. However, it is a less used practice by an attorney to protect the debtor. The reason for an attorney not going with this process may either be that they don’t know its full use and power, or that they don’t want to work this hard for something that will pay them less. But whatever is the case, in the end, it is the debtor who suffers. The debtor completes the bankruptcy process, and then gets to know that to keep their property, they still need to pay some debt.

This weapon is found deep into the Bankruptcy Code at 11 USC section 522(f). It is an option available for both Chapter 7 and Chapter 13 filing. The Law gives an exemption called “lien stripping” on the security interest in household goods or tools.

3) Non-Possessory Security Interest

Section 522(f) needs the security interest to be non-possessory, that is, until the debt is paid, the property is not under the possession of the lender.

4) Non-Purchase Money Security Interest

Another element of 522(f) is that the security interest must be a non-purchase money security interest. This mostly helps you identify if you used the loan proceeds to purchase that property.

5) Impairs an Exemption

When you file for Bankruptcy, everything you own is considered as a part of the ‘bankruptcy estate’. Your attorney will apply some Exemptions to make sure that your property is not used to pay off the debts. Even though Bankruptcy is a federal law, using exemptions is very complex, and is considered at the state level. The concept behind it is that you need to have a certain property so that you can start afresh through Bankruptcy.

6) What can it be used for?

This tool is mainly designed to protect household goods. It can be used to reduce the lien on household goods like Television, Gaming Systems, and computers.

Remember, this law does not apply to cars and other vehicles. However, there is another section in bankruptcy that can help you with your car loan, so do not worry. Chapter 13 Bankruptcy can help you to strip a lien on your car loan. Again, another part of section 522(f) may allow you to strip a lien on your house (if it was created by a Court Judgement). Depending on the total value of the house, and other parameters, by making some or all part of the Judgement an unsecured debt, and eliminate it through the Bankruptcy process.

11 USC section 522(f) is a very powerful tool, that can help you way more than you can think of in your bankruptcy. But to know more about it, and utilize it in the best possible way, you need a good attorney.

You can also contact Recovery Law Group from Los Angeles & Dallas, TX for the Same.

Contact – (888-297-6203).