If I'm a creditor of a debtor who has filed Chapter 7 and have a secured interest in his personal vehicle, do I lose my lien if his debts are discharged?
Question Details: The secured interest is in his personal vehicle; I have a lien which resulted from a loan.
A secured debt is treated differently than other types of debt in a Chapter 7 bankruptcy; it has 2 parts to it. The first part has to do with the personal liabiltiy of the debtor to pay the creditor back; a Chapter 7 discharge generally wipes out this personal liability. This means that personal liability is extinguished, so the creditor cannot sue the debtor to collect on the debt. The second part has to do with the creditor’s lien (or security interest) on the property that serves as "collateral" for the debt. The lien gives the creditor the right to repossess the property and/or force its sale if the debt remains unpaid, since iens are not affected by the discharge. Accordingly, by failing to remain current on payments, as a general rule a debtor can lose the property even though the debt itself has been discharged.
Please note that the above is a generalization of the rules and every case differs on the specific facts involved. At this point, you should consult directly with either the applicable bankruptcy court or a local attorney for further advice.