Debtor Beware: What is a Judgement Lien?
When a debtor fails to make payments on a debt, the creditor can seek legal action to recover the owed funds. If the creditor wins the case, they can obtain a judgement lien, which is a court order that allows them to seize the debtor’s assets to satisfy the debt. A judgement lien can have serious consequences for a debtor, as it can affect their credit score, limit their ability to sell or refinance their property, and even lead to wage garnishment.
===The Impact of a Judgement Lien on Bankruptcy
Filing for bankruptcy can provide a debtor with relief from overwhelming debt and a fresh start. However, if there is a judgement lien against the debtor’s property, it can complicate the bankruptcy process. A judgement lien is considered a secured debt, meaning it is attached to the property and has priority over unsecured debts. This means that the creditor with the judgement lien has the right to seize and sell the property to recover the owed funds, even if the debtor has filed for bankruptcy.
===Can You File for Bankruptcy with a Judgement Lien?
The answer is yes. Filing for bankruptcy can provide a debtor with the opportunity to discharge some of their debts, including unsecured debts such as credit cards and medical bills. However, a judgement lien is not automatically discharged in bankruptcy. In fact, filing for bankruptcy can only discharge the underlying debt, not the lien. This means that the creditor can still enforce the judgement lien against the debtor’s property, even after the bankruptcy is complete.
===Exploring Your Options: Discharging a Judgement Lien in Bankruptcy
There are several options available to discharge a judgement lien in bankruptcy. One option is to file for Chapter 7 bankruptcy, which involves liquidating the debtor’s assets to pay off their debts. If the debtor has no non-exempt assets, the judgement lien may be considered unsecured and can be discharged along with the other unsecured debts.
Another option is to file for Chapter 13 bankruptcy, which involves creating a repayment plan to pay off the debts over a period of three to five years. In this case, the judgement lien may be reduced to the value of the property, and the debtor would only have to pay off the reduced amount through their repayment plan.
Finally, the debtor may be able to negotiate a settlement with the creditor to release or reduce the judgement lien. This option requires the debtor to have the funds to pay off the reduced amount in a lump sum or through a structured payment plan.
In conclusion, a judgement lien can have serious consequences for a debtor, but it is possible to file for bankruptcy with a judgement lien. However, discharging a judgement lien in bankruptcy requires careful consideration of the available options and the debtor’s financial situation. Seeking the advice of a bankruptcy attorney can help debtors navigate the complex process of bankruptcy and take the necessary steps to achieve a fresh start.