What Is a Judgment Lien
If someone wins a judgment against another party in court, then this becomes a non-consensual obligation that must be fulfilled. There are a wide variety of ways for this judgment to become satisfied, including direct payment or an agreement to a payment arrangement. If someone does not have the ability to pay the judgment, however, but they do have property that they own, a judgment lien may be issued. This lien is placed to a property without consent of the owner. It must be recorded with proof of the judgment in the county or state where the debtor lives. Sometimes a judgment automatically creates this lien on any real estate that is owned and is recorded upon issuance of the order. In return, if the property is sold, the creditor holding the lien becomes a priority creditor and will receive the money owed to them based on the amount of the lien.
There Are Several Types of Judgment Liens Available
The most common form of a judgment lien attaches to the real estate that is owned by the debtor. All real estate can have a judgment lien assigned to it to cover the costs of the awarded judgment to the creditor. There are three other types of judgment liens that may also apply in specific situations.
Personal property judgment liens. This type of lien applies to any personal property other than real estate that may be owned. This lien is usually not issued unless other collection efforts of a judgment have tried and failed. It is usually an ineffective lien because private property is usually sold without a title, so no knowledge of the existing lien may be conveyed to the purchasing third party.
Vehicle judgment liens. A lien can also be placed on any vehicle that is owned when a judgment is issued. These liens aren't always publicized, so if you have personally received a judgment that remains unresolved, you may wish to check with your local Department of Motor Vehicles to determine if a lien exists. A secured debt when a bankruptcy is filed may also indicate a judgment lien has been placed.
Judgment liens on later acquired property. If someone has a judgment against them and they were to purchase real estate several years afterward, they may discover that the court has issued a judgment lien on county land even if they owned no property at the time the lien was issued. Most real estate liens expire in 10 years or less, but they can also be renewed. It is important to recognize that a judgment lien is classified as a secured debt and not an unsecured debt. Someone with credit cards, signature loans, or vehicle loans has unsecured debt because it is a voluntary service. Medical bills are often classified as unsecured debt as well. A judgment lien, on the other hand, is an involuntary debt. This makes it a secured debt and that means it is treated differently.
Can a Judgment Lien Be Removed In a Bankruptcy Case?
If someone were to file for a Chapter 7 bankruptcy after receiving a judgment lien, then there is a possibility that they may be entitled to a procedure that is called “lien avoidance.” For a judgment lien to be avoided, there must be three specific criteria met. 1. The lien must have originated from a court-ordered monetary judgment. 2. The individual filing for Chapter 7 must be able to claim an equity exemption. 3. The lien would result in a loss of that exempt equity if the item were sold. If these conditions are met, an entire judgment lien can be completely removed. This can happen even if the property is no longer wanted. Sometimes a court will even allow a judgment lien to be avoided when there isn't an equity, but this is rather rare. It is usually only awarded in times of extreme hardship. Just filing for a bankruptcy will not guarantee a lien will be avoided. If a different chapter is filed instead of Chapter 7, then the judgment lien will likely be restructured rather than avoided. That's why it is important to know whether or not a lien exists on any property before getting involved with a bankruptcy case. Judgment liens can help a creditor get the money they deserve, but debtors still have options as well. By understanding the complete process, creditors and debtors will have the chance to get what they rightfully deserve.
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