Liens and Levies

• Liens and levies carry serious financial consequences and are usually the end result of a long period of non-payment and litigation. If you sign a contract with a creditor and refuse to make payments, your creditor may eventually sue you in court to make you pay. If the court determines that you do have an obligation to pay a debt, it may issue a judgment against you, authorizing your creditor to collect the money you owe. Liens and levies represent the physical enforcement of a creditor judgment. A lien is essentially a loan attached to one or more of your physical assets, such as your home. Before you can sell that asset, you must satisfy the lien against it by paying it off. Similarly, a levy is the physical collection of payment from you via attachment of your bank account or the garnishment of your wages.
  
  

Automatic Stay

• The automatic stay in Chapter 7 provides you with at least some protection from creditors that may have a lien or levy in place against you. The automatic stay tells creditors to stop collecting money from you, since you filed bankruptcy. In fact, the stay even protects you from phone calls, letters or other efforts your creditors might make to contact you. Even if a wage garnishment or lien went into effect before you filed bankruptcy, for the duration of your bankruptcy case, your creditors cannot legally undertake those actions, even if sanctioned by a court judgment.
  
  

Chapter 7 and Secured Debt

• Secured debts typically survive bankruptcy. When you file bankruptcy, you may very well have a lien against your property in the form of a car loan or a home mortgage. Both of these types of loans are not unsecured loans, like credit cards, but rather a type of loan in which the creditor has an actual monetary stake in the collateral for the loan. Unless you work out a deal with your secured creditors, those creditors typically have the right to repossess your physical property even after a Chapter 7 bankruptcy.
  
  

Liens and Levies From Lawsuits

• While liens resulting from secured debt usually remain in force after a Chapter 7 discharge, most liens and levies from lawsuits or judgments can typically be reversed after a Chapter 7 case. If you manage to discharge the debt underlying a judgment during the course of your Chapter 7 bankruptcy, the judgment attached to that debt is no longer enforceable. As a result, any garnishment of your wages or liens against your property similarly disappear. You will usually have to file a request with the court to vacate a judgment against you, but legally, your Chapter 7 discharge has the power to render your liens and levies invalid. You may even be able to recover some of the wages you had garnished before you filed for bankruptcy.