Legal Question in Real Estate Law in California

Re: Gift Transfer to Parents-Is Lien an Impediment?

Lines are of many types. Therefore, this answer is general and not specific to a particular kind of lien.

You can transfer your interest in the property. The transfer will not affect the lien, which will still attach to and encumber the property. To the extent you are liable to the lienholder, you will remain liable, and, depending on the basis of the lien, you might trigger a greater liability (e.g., a due-on-sale or its equivalent).

The bankruptcy of the lienholder has a somewhat complex effect, but doesn't let you off the hook. Instead, the claim is probably now held by the bankruptcy estate and may be under the control of a trustee or court, making dealings more difficult.

You need to present the situation (in detail) to a local lawyer, probably a real estate specialist, who can determine for you the validity of the lien, whether it can be negotiated and with whom, and whether there is danger of enforcement by foreclosure.

It would be preferable to remove the lien before making a gift of the property. You don't say whether there are loans on the property other than any reflected by the lien. This could be a factor to consider.