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Massachusetts Agencies

Discharge in Bankruptcy: Effect on Liens

Bankruptcy

In R. Powell & P. Rohan, 5 The Law of Property ¶658[3][b][iv] (Matthew Bender, 1992) the question of the effect of a discharge in bankruptcy on liens is discussed:

If the debtor is an individual, he or she may exempt certain property from disposition by the trustee, and may retain it free of the claims of most creditors. The individual debtor also ordinarily obtains a discharge of most pre-bankruptcy indebtedness. However, in general neither exemption nor discharge affects the enforcement of liens valid in bankruptcy.[1]

More recently, the Massachusetts Appeals Court confirmed the notion that the lien of the mortgage survives the discharge of the underlying debt. See First Colonial Bank for Savings v. Bergeron, et. al., 38 Mass.App.Ct. 136, 646 N.E.2d 758 (1995).

1 [Footnote in original:] [U]under the Bankruptcy Code as initially enacted at least one court concluded that a lien did not survive a bankruptcy discharge. See In re Ray, 26 Bankr. 534 (Bankr. D. Kan. 1983). That case has since been reversed. Chandler Bank of Lyons v. Ray, 804 F.2d 577 (10 th Cir. 1986). In addition, the statutory provision on which the case relied, Bankruptcy Code §524 (a)(2), was amended by the 1984 Amendments Act, with the apparent intent to preclude the view that liens do not (sic) survive discharge.