Judgment Liens in Bankruptcy

posted Aug 1, 2012, 10:05 AM by Keith Carr   [ updated Oct 25, 2012, 11:03 AM ]

Once you have been sued, the credit card company will then obtain a judgment against you. But now the question is can it collect. One method to collect judgment (which seems on the rise lately) is recording the judgment. Once a judgment is recorded in the county recorder’s office, a judgment lien arises upon debtor’s real estate. A judgment lien may recorded in the Secretary of State’s office in order for a judgment lien to be placed on a debtor’s personal property.

Bankruptcy allows the judgment lien to be stripped using an impairment statute. Namely, if the judgment lien impairs an exemption that the debtor would otherwise be entitled the judgment lien may be stripped. The average homeowner may exempt up to $75,000 in California, assuming a home with that much equity. If the homeowner’s equity is less than $75,000, and the exemptions applies, a creditor’s judgment lien can be stripped. The debtor must proceed by motion in the bankruptcy. If debtor has a lawyer, the lawyer will normally bring the motion. However, if the debtor has no lawyer, the debtor must attempt the motion on his/her own. In many cases (especially for Chapter 7) debtors who are not represented by attorneys simply ignore the judgment lien only to find out that they cannot refinance their homes due to the existence of a judicial lien, which could have been stripped in bankruptcy. If it is not too late, the debtor may attempt to strip the lien after re-opening the bankruptcy case. Other than this, the judgment lien will continue. Be aware!