When an individual borrower falls behind on paying their bills, creditors start filing collection lawsuits in order to a obtain court judgment. Once the judgment has been granted in favor of the creditor, the collection efforts begin. One common collection tool used by many creditors is to place a judgment lien against your house or other real property. This type of lien can help ensure that the creditor will eventually get paid what it is owed, even if it years down the road. How does this occur? The borrower cannot sell his or her home without paying the creditor from the proceeds of the sale in order to remove the lien.
If you have judgment liens filed against your home, filing a personal bankruptcy may be the best option for removing them. Before you implement this strategy, however, it is essential that you confer with a seasoned bankruptcy lawyer. You should be aware that simply obtaining a discharge order will not automatically eliminate the judgment liens filed against your home. In some cases, you can “strip” an inferior mortgage lien. For more information on lien stripping, please read our blog titled “Stripping Off Junior Mortgages in Bankruptcy.” There are also certain types of liens, such as tax liens, that are not avoidable.
Generally, a judgment lien can be discharged pursuant to 11 U.S.C. § 522(f). You can discover if a judgment lien has been placed against your property by searching the records in the counties where you own real property. Many debtors get confused at how judgment liens are handled in their bankruptcy case because the underlying debt can be eliminated but the lien remains intact unless specific action is taken to remove it. A debtor must remove the judicial lien of a non-priority creditor to the extent the lien encumbers the value of the debtor’s exemptions in the property. This means that if the value of the equity in your home would be exempt even without the lien, you can file a motion seeking to avoid the lien. Upon court approval of your motion, the lien is removed from the title on your real property and it is no longer valid or enforceable.
If you have judgment liens filed against your home and you are interested in learning more about removing them in bankruptcy, call us today to schedule your initial consultation. Our office is located in Melbourne, but we proudly serve individuals and businesses across the State of Florida.