Legal Question in Bankruptcy in Virginia

Re: Lien Holder Took Bankruptcy

A lien describes the encumbrance upon property (real or personal) which reflects the right of a secured party to take and sell the property to satisfy an obligation of the debtor. Usually the obligation is a note. When the secured party files bankruptcy, the note is an asset which can be collected by a Chapter 7 Trustee or collected by the debtor as part of the Chapter 11 reorganization. The note could be sold and the new holder, would then have lien rights to seize the property or sell it to satisfy the note. The answer to the question is "nothing" that is, the lien remains, but probably someone else owns the right to enforce the lien. It is possible that, over time, the lien will be abandoned even though the underlying debt is not paid. West Virginia statutes deal with how long the lien remains to prevent giving clear title. Usually, if the creditor files bankruptcy, there is an opportunity for the debtor to make a lump sum settlement with a discount and get a release of the lien.