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Massachusetts Agencies

Effect of Discharge

Bankruptcy

A discharge in bankruptcy does not affect liens on property. Although there must be originally an enforceable debt in order for the mortgage to arise,[1] if the mortgage is initially valid the subsequent unenforceability of the note will not affect the lien. This proposition has supported a foreclosure of a mortgage where the statute of limitation has run on the note,[2] and in SMH, Continuing Professional Education, Mortgagor vs. Mortgagee (1982) it is said:

In such cases, [although the lien survives] there would be no right to a deficiency judgment if the property did not bring sufficient revenues to pay off the debt. The same rule applies where the debt is discharged in bankruptcy. (Emphasis added).

The Appeals Court has cited the foregoing rule and has held that a bankruptcy would have no effect on the liens, even if a discharge of the debtor had been entered. See First Colonial Bank for Savings v. Bergeron, et. al., 38 Mass.App.Ct. 136, 646 N.E.2d 758 (1995).

1 See Vinton v. King, 86 Mass. 564 (1962).

2 See Atwood v. Fiske, 101 Mass. 363 (1869).