Does a bankruptcy case automatically remove liens–such as mortgages–against my property?

No, not at all. Secured creditors get extraordinary rights in a bankruptcy case. Bankruptcy may temporarily delay secured creditors, but most voluntary liens (those granted by agreement on houses, cars and household goods) have to be satisfied one way or another.

However, you have some opportunities to remove or avoid involuntary liens and a small category of voluntary liens. “Avoid” is the term used in the Bankruptcy Code for removing liens.

Chapter 7

You can avoid some involuntary liens (except for liens securing alimony or support obligations) that are on property that you could exempt. You can also avoid some voluntary liens on property that you could exempt. For these voluntary liens, you can only remove liens on certain household goods, “tools of the trade” and professionally prescribed health aids. Moreover, the term “household goods” includes only certain types of items (for example, clothing, one radio, one television, one VCR).

Chapter 13

If you file chapter 13, you have the additional ability to remove liens by completing payments under the plan. In some cases, the plan will reduce the amount that you must pay or change the time period over which you must pay the debt. In the case of homes and cars, the ability to change the payment terms is very limited.

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