Once a creditor obtains a judgment against you in court, there are several options available to the creditor to collect on the awarded judgment. One of the often used methods is to record the abstract of judgment with the county recorder. The creditor in many states can take the awarded judgment and record a lien against real estate you own. In California, the judgment can become a lien against any real estate located in the county where the judgment was recorded. In many states the creditor can also place a lien against your personal property by filing the notice of judgment lien with the Secretary of State. If a judgment lien has been recorded against your real or personal property, bankruptcy can help avoid the lien.
Under section 522(f) of the bankruptcy code a judgment lien can be removed/avoided from your real or personal property if it meets with the following requirements:
- Judicial Lien- the lien must have been obtained as a result of a judgment or other legal process. The judgment lien cannot have resulted from you consensually agreeing to place a lien on your property.
- Non-possessory and Non-purchase Lien - In order to qualify the creditor cannot have actual physical possession of the asset themselves but simply a legal claim against it. The lien cannot have resulted from you consensually placing a lien on the property in exchange for the creditor extending you creditor to purchase the asset or refinance.
- Property-The lien can be avoided on items such as household goods-clothing, furniture, appliances, radio, television, medical equipment, kitchenware or real estate.
- Entitlement to Exemption is Impaired-The judicial lien must impair your right to claim a bankruptcy exemption in order to avoid the lien. For example in California there is a $23, 250 wildcard exemption that allows you to protect any items totaling up to that amount. If a judicial lien for $5,000 was placed on your paid in full vehicle worth $10,000 it would impair your right to claim the full $10,000 as exempt. The judicial lien would damage your ability to claim the full value of the vehicle as a protected asset using the wildcard protection.
In bankruptcy a motion to avoid a judicial lien can be filed in a Chapter 7 and Chapter 13 bankruptcy case. If the court finds that the judgment lien can be avoided then an order will be issued by the court. Once the lien is avoided in bankruptcy it is considered invalid. Contact a local bankruptcy attorney if you have received a notice from the secretary of state or the county recorder indicating that a judgment lien has been recorded against your property.