If I’m a creditor of a debtor who has filed Chapter 7 and have a secured interest in his personal vehicle, do I lose my lien if his debts are discharged?

Get Legal Help Today

 Secured with SHA-256 Encryption

If I’m a creditor of a debtor who has filed Chapter 7 and have a secured interest in his personal vehicle, do I lose my lien if his debts are discharged?

The secured interest is in his personal vehicle; I have a lien which resulted from a loan.

Asked on January 27, 2015 under Bankruptcy Law, Virginia

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

A secured debt is treated differently than other types of debt in a Chapter 7 bankruptcy; it has 2 parts to it. The first part has to do with the personal liabiltiy of the debtor to pay the creditor back; a Chapter 7 discharge generally wipes out this personal liability. This means that personal liability is extinguished, so the creditor cannot sue the debtor to collect on the debt. The second part has to do with the creditor’s lien (or security interest) on the property that serves as "collateral" for the debt. The lien gives the creditor the right to repossess the property and/or force its sale if the debt remains unpaid, since iens are not affected by the discharge. Accordingly, by failing to remain current on payments, as a general rule a debtor can lose the property even though the debt itself has been discharged.

Please note that the above is a generalization of the rules and every case differs on the specific facts involved. At this point, you should consult directly with either the applicable bankruptcy court or a local attorney for further advice.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption