Liens

• Liens aren't always a bad thing: Your mortgage, for instance, is a voluntary lien that you agree to in return for a loan. Liens by unpaid creditors are usually involuntary on your part. First a creditor sues you to obtain a judgment that you owe the money. She then registers the judgment with the county where you own property, establishing her claim. Selling property that has a lien on it is possible, but not easy; if you do sell, the lien becomes the responsibility of the new owner.
  
  

Impaired Exemptions

• If you file Chapter 7, the court will sell off your assets to pay some of your debts, then discharge the rest. Liens based on unpaid debts will remain attached to your property, even after the debt is gone. This doesn't apply to a lien that impairs your Chapter 7 exemptions, the legal guarantee that some of your property is safe from sale. For example, if your state exempts $10,000 of home equity and you only have $9,000 in equity, the home is safe from sale. If $5,000 of that exempt value is covered by a judicial lien, it impairs your exemption and you can ask the court to discharge it.
  
  

Other Exceptions

• If one of your creditors files a lien within the 90 days before you file bankruptcy, the court may throw it out: This is because bankruptcy law treats unsecured creditors -- those without liens -- equally, and the lien, instead, gives one creditor preferential treatment. In Chapter 13 bankruptcy, you can try to strip liens: If your house is worth less than your mortgage, you can ask the judge to declare that there's no longer any value to secure other liens. This turns them into unsecured debts which are easier to pay off.
  
  

Timing

• If your creditor hasn't yet placed a lien on your property, bankruptcy will prevent that. Filing bankruptcy triggers an automatic stay that blocks any attempt to collect debts; the stay also suspends creditors' lawsuits and prevents them from filing new ones. If you discharge the debt in bankruptcy, your creditor no longer has any grounds for filing a lien. Some debts, however, survive bankruptcy; if you owe a creditor one of those, you can't discharge it and your creditor can resume trying to collect when you emerge from bankruptcy.