Many bankruptcy petitioners are unsure whether or not filing bankruptcy will remove a judgment lien against their property. In some situations, you can get rid of judgment liens or avoid judgment liens with a Chapter 7 bankruptcy, so it’s important to discuss your specific situation with an experienced bankruptcy attorney.
What Is a Judgment Lien?
A judgment lien is a lien attached to personal property after a creditor obtains a money judgment against the borrower from the court. To obtain a judgment lien, a creditor must sue a debtor, get a court-ordered judgment against them, and then file a lien against their personal property to satisfy the judgment. The judgment lien allows a creditor to take personal property and sell it to satisfy the judgment. In certain situations, borrowers struggling with overwhelming debt can avoid judgment liens in a Chapter 7 bankruptcy.
Consider This Example of a Judgment Lien:
If Melissa owes $5,000 to a financial institution and stops paying the loan, the bank will likely sue Melissa for the balance. The court may enter a judgment against Melissa for the $5,000. The financial institution may then file a judgment lien against Melissa’s personal property. Personal property can include anything from jewelry to furniture to appliances to a rare coin collection. The financial institution can send the sheriff to Melissa’s house to take the personal property and sell it to satisfy the original debt.
Chapter 7 Bankruptcy: Avoiding Judgment Liens
Chapter 7 bankruptcy petitioners may get rid of judgment liens on their property through the lien avoidance process. You may avoid a judgment lien if you meet three specific conditions:
- Lien is a Result of Court-Issued Money Judgment: the lien in question must be a result of a judgment issued by the court against the borrower and in favor of a creditor who sued for money owed and not repaid.
- Property Would be an Eligible Bankruptcy Exemption: According to bankruptcy law, Chapter 7 petitioners may exempt specific property from the bankruptcy estate, which protects it from creditors. The avoid a judgment lien, the property in question must qualify as a bankruptcy exemption. For detailed information about eligible bankruptcy exemptions, discuss your situation in detail with an experienced Tennessee and Georgia bankruptcy attorney.
- Lien Would Impair Petitioner’s Exemption: If the petitioner could have exempted equity in the personal property, but the lien reduces the amount of the equity that could have been exempted, the bankruptcy exemption is impaired. When the judgment impairs a bankruptcy exemption, the petitioner may avoid the lien with Chapter 7 bankruptcy.
There is no shame in turning to bankruptcy to seek a discharge of debt when unintended circumstances leave you struggling to provide for your family. Are you out of choices? Do you need help releasing your family from the chains of debt? Do you need help to save your home from foreclosure? Don’t hesitate to call Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney. We help good people through bad times.