If a creditor gets a judgment against you and the debt is dischargeable in a Chapter 7 bankruptcy, filing for bankruptcy will wipe out a creditor’s ability to collect. Judgments, however, can create a lien on your property. So it’s possible to wipe out a judgment in bankruptcy and remain obligated to pay the lien.

When can a lender obtain a deficiency judgment against a borrower?

§ 580(d) limits a lender’s right to seek a deficiency against the borrower after the property is foreclosed by a trustee’s sale regardless of the type of loan or the type of property being foreclosed if the sale did not generate enough proceeds to pay the full amount of the debt.

How does a deficiency judgment work in Chapter 7 bankruptcy?

However, if the lender placed a lien on any of your properties using the deficiency judgment, Chapter 7 bankruptcy will not automatically remove that lien (your discharge only eliminates your personal liability for debts). In that case, you will have to file a motion and ask the court to avoid the lien.

What happens when you file Chapter 7 bankruptcy?

When you receive your discharge, your lender can no longer come after you to collect its debt. (Learn more about how Chapter 7 bankruptcy works .) However, keep in mind that your discharge only eliminates your liability. It does not automatically get rid of liens on your property.

Can a deficiency judgement be issued after a foreclosure?

Just because your foreclosure sale didn’t bring in enough money to pay off your mortgage doesn’t mean that your lender can automatically come after you for the rest. Deficiency laws are complex and can vary significantly from state to state. For instance, some states don’t permit deficiency judgments after foreclosure.

Can a lien be placed on a property in Chapter 7 bankruptcy?

However, the judgment may remain on record as a valid lien against any property you owned at the time your Chapter 7 bankruptcy was filed. The creditor can’t do anything with the lien, but it will need to be paid off in the event that you try to sell the property while the judgment is in place.