Q: If the lien is more than the debt, can the debt be forgiven
I was given an RV that has a lien, the rv has been vandalized severely, making the RV not worth more than the lien. Can the lien be forgiven? I am not sure what to do as I need this RV desperately.
Assuming that the lienholder properly perfected it lien (easy to do), a bankruptcy filing by its owner will not impair or "forgive" the liened indebtedness.
If you file a Chapter 7 case (the *Desnup* US Supreme Court decision), the bankruptcy has no effect, and the lien cannot be "stripped down". If you fail to continue Note payments, the lienholder may foreclose. Once the vehicle is sold, however, and deficiency remaining will be uncollectable (as an unsecured claim discharged in bankruptcy).
A different result may occur if you file a Chapter 13 case. It may be possible to reduce the value of the RV to its current fair market value, and the debt may be adjusted accordingly through a confirmed Plan.
There are other benefits in a Chapter 13 case- e.g., if you have missed payments on the RV, the arrearage amount is separated from the balance due on the Note, and the arrearage is payable through the Plan but interest accrual on the arrearage stops. Remaining Note payments, however, must be paid going forward during the bankruptcy.
Speak with an experienced lawyer licensed to practice in your state about all ramifications.
Timothy Denison agrees with this answer
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