When someone wins a case against you and registers the judgment on your property, a judgment lien is established.
A judgment lien is a “nonconsensual lien,” which means it attaches to your property without your consent. When someone wins a case against you, the money judgment is recorded against your property as a judgment lien. Find out more about how:
A judgment lien is issued to a creditor.
A judgment lien is attached to property by a creditor, and a judgment lien may be discharged in bankruptcy.
Learn the fundamentals of liens, whether you should employ a lawyer if a creditor sues you, and if current cases are dischargeable in bankruptcy.
Do you need further background information?
Learn what you should avoid doing before declaring bankruptcy.
Learn the distinctions between Chapters 7 and 13.
Get answers to your bankruptcy-related inquiries.
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How Does a Judgment Lien Form?
Only when someone sues you and wins a monetary judgment against you may a judgment lien be placed on your property. Most states require the “judgment creditor,” or the person or corporation that won, to file the judgment with the county or state.
A judgment against you instantly generates a lien on the property you own in that county in a few states. The judgment creditor is not required to register the judgment in order to get the lien.
Most unsecured debt holders, such as credit card balances, hospital bills, and personal loans, must obtain a judgment before engaging in more aggressive collection measures. A creditor with a money judgment, for example, might “garnish” or confiscate your earnings and “levy” or drain your bank account.
Because retrieving property may be more costly, creditors often employ these tactics before resorting to invoking the lien to reclaim property. Learn what happens in court when a creditor sues you.
Property that a Judgment Lien Can Attach To
Almost all of your belongings are for sale. However, you may be able to safeguard part of it via the use of an exception.
Liens for judgments on real estate. A judgment lien applies to real estate you own in the county where the creditor registers the lien or where the judgment is entered. Selling real estate may be costly, and a creditor will not pursue this option unless you have substantial equity in the property. Only the money left after paying off mortgages (and any earlier-in-time liens) and sales fees will be paid to the creditor.
Personal property is subject to judgment liens. A judgment lien may also apply to your “personal property,” or anything other than real estate, in several jurisdictions. Personal property judgment liens, on the other hand, are often ineffectual unless the property is very valuable. Why? Most personal property has an exception that permits the owner to retain it or isn’t valued enough to warrant the expenditures of getting it. Furthermore, since many creditors do not register personal property liens (though some do with the Secretary of State), it is quite simple to sell it to a third party who is unaware of the lien’s existence.
Vehicles with judgment liens. A judgment creditor may also file a judgment with your state motor vehicle department in order to get a judgment lien on any car, truck, motorbike, or other motor vehicle you possess.
Judgment Liens Can Become Attached to Later Acquired Property
Judgment liens filed in your county will often attach to property you buy later. Even if you don’t own any real estate, a judgment might be filed at your county land records office. If you acquire some real estate a few years later, that annoying old lien will still be waiting for you.
Most real estate liens expire after a certain period of time (usually seven to 10 years in most states), while several creditors may renew liens forever. Read How long does a creditor have to collect on a judgment against me for additional information.
How to Avoid Judgment Liens in Bankruptcy
Some judgment liens may be discharged in Chapter 7 bankruptcy. If you have a lien on your property and want to file for bankruptcy, be careful to notify your bankruptcy attorney.
Because the lien will not be removed automatically, your lawyer must submit a motion requesting the court to do so. You should budget for an extra fee for the move.
How a Bankruptcy Motion to Avoid a Judgment Lien Works
The lien will be avoided if it interferes with your capacity to preserve property protected by a bankruptcy exemption, but it does not go any further. Assume your state permits you to safeguard $5,000 in car equity.
In such instance, the bankruptcy court will almost certainly release the $5,000 lien. However, the creditor’s lien will apply to any further equity exceeding $5,000.
If You Forget to Inform Your Bankruptcy Attorney About the Lien
Furthermore, if you do not inform your bankruptcy attorney about the lien, your lawyer will most likely be unaware of its existence. Don’t be concerned if you forget and end up in bankruptcy with a lien on your property; it occurs all the time.
The bankruptcy court should enable you to reopen your case and submit a request to resolve the judgment lien. Learn more about bankruptcy motions to prevent judgment liens.
Consult a Bankruptcy Attorney
Although filers may conduct simple bankruptcy cases on their own, a case containing a lien is usually too difficult to undertake without expert assistance. Consider hiring a bankruptcy attorney. The majority provide a free first consultation.