When a creditor may not have a valid lien, Chapter 13 gives you a good way to defeat that disputed lien and the claim against your property.

Our last blog post dug into what happens when a creditor does not assert its rights in the lien it has against your property. Or it does so only after your Chapter 7 case is completed. We showed the advantages of dealing with this situation under Chapter 13.

But what if there’s a dispute about whether there is a valid lien? Today we’ll show how, again, Chapter 7 leaves you with some practical problems, while Chapter 13 provides a good solution.

The Creation of Liens on Your Property

There’s a big difference between a debt in which the creditor has a lien on your property and one in which it doesn’t. It’s the difference between the creditor having rights against that property and having none. It’s usually the difference between the creditor being able to take or repossess your property or not. In a Chapter 7 “straight bankruptcy” it’s the difference between having to pay part or all of the debt to keep your property vs. paying nothing.

To the extent you do not pay off your debts during a Chapter 13 payment plan, the remaining balance is usually legally written off forever.

Our last two blog posts were about how Chapter 7 “straight bankruptcy” deals with “general unsecured” debts. But how about Chapter 13 “adjustment of debts”? What happens to those simple debts, which are neither secured by a lien on something you own nor are not a “priority” debt?

Chapter 7 doesn’t wipe away “statutory liens.” But Chapter 13 gives you a safe and flexible way to deal with them.

In our July 1 blog post we gave a list of 10 ways that a Chapter 13 “adjustment of debts” can help you keep your home. Today we get into the 8^th of those 10 ways. Here’s how we introduced this earlier.

Bankruptcy can’t write off certain kinds of debts. Chapter 13 enables you to prevent liens hitting your home from those debts.

Our last blog post was about how Chapter 7 “straight bankruptcy” helps prevent liens on your home arising from special debts. These are debts that can’t be discharged—written off in bankruptcy. Examples of these special debts include recent income taxes and unpaid child or spousal support.

If one of your creditors is not included in your "schedules" you risk continuing to owe that debt after your bankruptcy is finished.

Legal Obligation to List All Creditors

Overall you are required by law to list all your debts and their creditors on your bankruptcy schedules. You can’t do a partial bankruptcy, listing most of your debts but hiding one or two that you don’t want to be affected. You must include every debt on which you are legally obligated.