Bankruptcy can give you a fresh financial start but removing judgment liens on your property can be tricky. A local bankruptcy lawyer can help you understand how judgment liens work and advise you on the best way to handle them before, during and after bankruptcy.
What is a Judgment Lien?
A lien isn’t necessarily a bad thing. In fact, mortgages and other loans could be considered liens. However, if a creditor files a lawsuit and obtains a judgment against you before you file for bankruptcy, the judgment could be attached to your home or other property as a lien. This means that the debt you owe is secured by your property, and the creditor could call and demand you pay the entire debt you owe. In many cases, a judgment lien will prevent you from selling or refinancing unless the lien is first satisfied.
How A Bankruptcy Lawyer Can Help
Seeking counsel from experienced attorneys at a bankruptcy law firm can help you get ahead of any judgment liens that may be placed on your property. If a judgment lien has already been filed, bankruptcy may stop the lien from being imposed and help you avoid foreclosure.
Judgment lien avoidance in bankruptcy requires an additional legal procedure as outlined in the U.S. Bankruptcy Code. Unless this procedure is properly completed the judgment lien will continue to attach to your property after your bankruptcy case is discharged. However, an experienced bankruptcy attorney may be able to void the lien under certain circumstances.
A judgment lien has to meet the following conditions to qualify for avoidance:
You must qualify for a homestead exemption on the property to which the judgment lien is attached. A homestead exemption is relief from liability that is given to the value or a portion of the value of your primary residence. Homestead exemption amounts and laws vary from state to state. Residential real estate lawyers can advise you on the specific laws that apply in your home’s jurisdiction.
The lien being avoided must be a “judicial lien.” Generally, this means that the judgment lien resulted from a judgment that was entered against you in a lawsuit. This type of lien cannot be associated with child or spousal support, a mortgage foreclosure, or tax or government lien.
Chapter 7 and Chapter 13
If you qualify for avoidance in Chapter 7 bankruptcy, the full or partial amount of a judgment lien may be taken off the title. The voided amount is permanently discharged when bankruptcy is completed.
The voided judgment lien amount is added to the rest of your general unsecured debts in Chapter 13 bankruptcy. It is included in your repayment plan, which is typically 3-5 years. As long as you make payments on your general unsecured debt as agreed upon in your repayment plan, the portion that has not been paid is discharged when your repayment plan is completed.
If you need assistance with a judgment lien, our experienced West Chester bankruptcy Lawyers at Carosella & Associates can advise you on the best course of action to protect your interests.