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I saw on NBC news tonight that debt collectors are putting liens on the debtor home for medical debt. My question is if a person files bankruptcy wouldn't that just quash the lien . I just want to know. I realize this not what this board likes to here. I currently have no health insurance and no longer working.
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I saw on NBC news tonight that debt collectors are putting liens on the debtor home for medical debt. My question is if a person files bankruptcy wouldn't that just quash the lien . I just want to know. I realize this not what this board likes to here. I currently have no health insurance and no longer working.

Bankruptcy may, or may not, quash the lien. The thing about a lien on a house is that it doesn't need to be satisfied until the property that the lien is against changes hands, and no payments are required on the lien until the property changes hands. Because of that, a lien on a home, in and of itself, isn't always considered a debt that needs to be relieved by bankruptcy.

You would have a better chance of extinguishing the debt through bankruptcy if you filed bankruptcy before a lien was placed.

That said, if you have no income to protect, bankruptcy doesn't usually help much. Bankruptcy is best used as a tool to protect future income. It doesn't protect current assets, except for workplace retirement accounts that are protected by ERISA and the assets that your state allows - often some equity in a home, a car, and a set limit on IRAs. If you don't have any income and you've already spent down everything except the assets that are protected in bankruptcy, you're pretty much 'judgment proof'. Therefore, it doesn't usually pay to spend the money to go through the bankruptcy process.

AJ
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<<I saw on NBC news tonight that debt collectors are putting liens on the debtor home for medical debt. My question is if a person files bankruptcy wouldn't that just quash the lien .>>


It should, Filing for BK should stop pretty much any collection action in its tracks. And it's the responsibility of the person filing collection action to check to be sure no BK has been filed. If they neglected to check and take collection action they can be penalized by the BK court.


Seattle Pioneer
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<<I saw on NBC news tonight that debt collectors are putting liens on the debtor home for medical debt. My question is if a person files bankruptcy wouldn't that just quash the lien . I just want to know. I realize this not what this board likes to here. I currently have no health insurance and no longer working.

Bankruptcy may, or may not, quash the lien. The thing about a lien on a house is that it doesn't need to be satisfied until the property that the lien is against changes hands, and no payments are required on the lien until the property changes hands. Because of that, a lien on a home, in and of itself, isn't always considered a debt that needs to be relieved by bankruptcy.>>


A lien is just a claim by a creditor. It's designed to give a creditor a chance to file a lawsuit to adjudicate a claim. It typically prevents a property from being sold until that claim has been resolved by a court.

A bankruptcy wont "quash" a lien, but it will also prevent a property from being sold until all issues of debt and assets have been resolved.

If a creditor has a mortgage on a property and is foreclosing on the property, BK will typically prevent that foreclosure from proceeding until the bankruptcy has been resolved, or at least until the BK court gives permission for foreclosure to proceed.



Seattle Pioneer
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A lien is just a claim by a creditor. It's designed to give a creditor a chance to file a lawsuit to adjudicate a claim.

Depends on what kind of lien. Mechanic's liens (generally for work on a property) can often be filed by just recording them, depending on your state's laws. Most liens from other creditors, such as medical bills (which was the subject of the question), credit cards or taxes, need to have a judgment found against the property owner first. Getting a judgment generally requires a lawsuit to be filed and adjudicated in the creditor's favor prior to the creditor being able to place the lien. (Again - depending on your state's laws.)

It typically prevents a property from being sold until that claim has been resolved by a court.

Liens don't necessarily prevent the property from be sold, as long as the lien can be satisfied as a part of the sale of the property. If the seller is underwater, so that the lien can't be satisfied, then there can be issues with selling the property.

If a creditor has a mortgage on a property and is foreclosing on the property, BK will typically prevent that foreclosure from proceeding until the bankruptcy has been resolved, or at least until the BK court gives permission for foreclosure to proceed.

Correct, but that wasn't the question that was asked.

AJ
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It should, Filing for BK should stop pretty much any collection action in its tracks. And it's the responsibility of the person filing collection action to check to be sure no BK has been filed. If they neglected to check and take collection action they can be penalized by the BK court.

Stopping a collection is not the same as quashing a lien that's already been filed, which is what the question was.

The lien may, or may not, be eliminated by the BK court. If there is enough equity in the house that the amount of equity allowed by the state is exceeded by the amount of the lien, then the BK court will probably allow the lien to stand. For example, in Washington state, where you live, only $125k of home equity is protected. Many homeowners in WA have significantly more equity than that. If that's the case, the lien probably would not be quashed.

AJ
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