If you haven’t been able to pay your bills and creditors have gotten judgments against you, it is likely that judgment liens have been placed against your home. A common question we hear at Levitt & Slafkes, P.C. is, “will filing bankruptcy remove the judgment lien on my house?”
The answer is: It depends-but in certain situations bankruptcy can indeed help eliminate certain judgment liens.
In this blog we will explain what a judgment lien is, how it works, and whether bankruptcy will eliminate the lien.
What Is a Judgment Lien?
A judgment lien is a legal claim that a creditor puts on your property after winning a lawsuit against you.
This can happen when:
- You haven’t paid your bills (such as credit cards, medical bills, or personal loans;
- Your creditor files a lawsuit against you and gets a judgment; and
- The creditor records the judgment with the judgment section of the court as a lien on your real property (such as your house).
- Once the judgment lien is recorded, the holder of the lien is entitled to payment when the property is sold or refinanced.
What Is The Difference Between the Underlying Debt and the Judgment Lien?
A lien and a debt are separate concepts that are treated differently under bankruptcy laws.
Will A Bankruptcy Discharge the Debt Underlying the Judgment?
Yes. A Chapter 7 or Chapter 13 bankruptcy discharge can eliminate many types of unsecured debts, including the debt behind most judgment liens.
Will A Bankruptcy Discharge Automatically Eliminate a Judgment Lien?
No. A lien is not automatically discharged and can remain after you receive a discharge and your bankruptcy case is closed.
How to Eliminate a Lien During a Bankruptcy
If the following criteria are met, a motion can be filed during your bankruptcy to avoid (eliminate) a judgment lien.
Specifically:
- The lien must impair your homestead exemption. If your home is worth less than what you owe on your mortgage(s) or you have little or no equity, the judgment lien is likely impairing your exemption.
- The lien must be the result of a debt that is dischargeable.
- The lien cannot come from non-dischargeable debts, such as certain taxes and domestic support obligations.
You Need an Experienced Bankruptcy Attorney to Address Liens
Judgment liens are complex. It is critical that you adequately address liens during the bankruptcy process.
At Levitt & Slafkes, P.C., we help individuals and families throughout New Jersey protect their homes and cars. With our decades of experience and vast knowledge of the law, we will make sure your bankruptcy is handled right.
Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at Levitt & Slafkes, P.C..
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.