impairs an exemption

When a lien, in combination with other liens and the amount a debtor may claim as exempt, exceeds the value of property. For example, if a debtor's home is worth $200,000, the debtor is entitled to a $35,000 homestead exemption, and the home is subject to a mortgage of $150,000, a lien that exceeds $15,000 impairs the debtor's homestead exemption: Once the mortgage was paid off, there wouldn't be enough equity left to pay both the exemption and the lien.

Category: Bankruptcy, Foreclosure & Debt → Bankruptcy