A lien on a debtor’s property ordinarily survives bankruptcy. Cars can be repossessed, real property sold at foreclosure, and personal property attached. This result, however, is not inevitable. Both debtors and bankruptcy trustees have at their disposal a variety of powers under the Bankruptcy Code to avoid, or “strip” liens to protect certain exempt assets from a secured creditor’s reach. The statutory exemptions to which these avoidance powers attach, the sources of these powers, and their scope and limitations are fully revealed in Judgment Avoidance: Exemptions and Lien Stripping, What Every Maryland Attorney Should Know, written by attorneys Mark Robert Kivitz and Jan Ingham Berlage.
Lien stripping comes in two primary forms, strip downs and strip offs. The reach and availability of these avoidance techniques vary greatly depending on the nature of the lien, the property it covers, and the debt it secures. A lien strip down is partial and may be available where the debt is undersecured, as when debt exceeds the value of exempt property securing it. Such a lien can be bifurcated, leaving a secured portion (equal to the value of the collateral), and an unsecured (and thus avoidable) portion as to the balance. A lien strip off involves teasing away, or stripping off, the lien from the collateral. It is most often employed against a second or junior lien which, when stripped, will be left exposed as unsecured debt.
As the nature of the lien–security interest, statutory or judicial–is crucial to determining whether and how it might be avoided, Judgment Avoidance: Exemptions and Lien Stripping includes an explanation of each of these types of encumbrances, followed by a detailed review of the many statutorily or judicially sourced avoidance techniques. A consensually granted security interest, for example, may be stripped only as to a non-purchase money security interest in exemptible personal property. Some liens that arise by operation of law after a pre-bankruptcy entry of judgment, in contrast, are subject to a far greater range of avoidance powers and may be used to protect both exempt realty (e.g., a “homestead”) and personalty (e.g., household good or trade tools). As the availability of avoidance powers vary depending on whether the bankruptcy is filed under Chapter 7, 11 or 13, these distinctions are fully described in the book, as are thorny issues that arise when property is titled jointly.
Judgment Avoidance: Exemptions and Lien Stripping contains citations to applicable statutes and to court opinions analyzing and applying them under a variety of circumstances. It provides timelines and sample pleadings and forms, including motions, notices, consents and proposed orders, for use by the practitioner in determining whether, when and how to employ lien stripping strategies on behalf of a client. It is a comprehensive work that will provide a solid foundation in more than 50 pre-bankruptcy exemptions to any attorney who counsels debtors and creditors. It will also provide in-depth analysis of lien stripping in its many manifestations to inform even the most experienced bankruptcy attorney.