A bankruptcy may result in removing a judgment lien placed against your home

You can avoid judgment liens on property resulting from creditors’ judgments when filing Chapter 7 bankruptcy if the lien is on exempt property.

Bankruptcy is a powerful debt relief tool. Not only can you discharge your personal obligation to pay your debts at the end of the bankruptcy case, but in some cases you can also eliminate judgment liens from your property.

What is a judgment lien?

A creditor can get a judgment lien against you by suing you for an unpaid debt and obtaining a judgment against you from the court. The creditor can then take that judgment and file a lien against your property to satisfy the judgment. A lien allows the creditor to take your property and sell it. Additionally, if there is a lien on your property and you wish to sell it, you would need to pay the judgment at the closing in order to clear the title and complete the sale.

What happens to judgment liens in bankruptcy?

When you file for Chapter 7 bankruptcy, you may be able to get rid of liens on your property, also called avoiding the liens. In order to be able to avoid the lien, it must meet three criteria:

  • The lien is the result of a judgment a court entered in favor of a creditor who sued you for money you owed
  • The lien is attached to property that you could exempt from the bankruptcy estate
  • The lien reduces the amount of equity in the property that you could exempt, which "impairs" your exemption

A lien can be partially or fully avoided, depending on the amount of your exemptions and the amount of the judgment attached to the lien. The amount that you can avoid is subject to the exemptions that you can elect to assert based on guidance from your bankruptcy counsel.

To avoid the lien during your bankruptcy case, you need to file a motion with the court to avoid the lien. If your creditor does not respond, the court will enter an order avoiding the lien. If your creditor does reply, there will be a hearing so you can produce evidence that the lien can be avoided. If the court finds that the lien can be avoided after the hearing, it will enter an order to avoid the lien.

Who can help me eliminate liens in bankruptcy?

The bankruptcy process is governed by many rules, and filing bankruptcy can be quite complex for those without legal training. If you are considering filing bankruptcy, speak with an experienced and compassionate bankruptcy attorney who understands the issues you are facing and can help you develop strategies for keeping the assets that are most important to you.

Keywords: chapter 7 bankruptcy; judgment lien; lien avoidance