Avoiding a Judgment Lien in Bankruptcy
One of the most important reasons to speak with an experienced bankruptcy lawyer as soon as possible after you begin to fall behind on making payments on your debts is because of the threat of judgment liens. Judgment liens can transform a debt that would have been eliminated in bankruptcy into one that not only will last after bankruptcy, but could impair the value of your home. However, there may be a way for a skilled bankruptcy attorney to eliminate a judgment lien on your home if one has already been imposed. Read on to learn about judgment lien avoidance in bankruptcy, and contact an attorney as soon as possible if you have concerns about a judgment lien on your property.
Judgment liens are often the result when a creditor is successful in filing a lawsuit against you for the unpaid debt that you owe. Judgment liens, when filed against a piece of property that you own, essentially give the creditor or debtor a share of ownership in that property. Whereas the debt may have been medical debt, credit card debt, or some other form of unsecured debt prior to the lawsuit, the debt becomes secured after a judgment lien is issued and attached to your property. While unsecured debt can and often is completely eliminated in bankruptcy, it is rare that secured debt can be eliminated.
One exception to this rule is when a judgment lien has been filed against your home. A bankruptcy petitioner who is a homeowner is granted what’s known as a “homestead exemption” when filing for bankruptcy. This exemption protects the equity you have in the home in which you live up to an amount set by state or federal law. In Maryland, the bankruptcy homestead exemption is $22,975. If a judgment lien filed against your home would impair that exemption, then the lien may be “avoided,” or eliminated through bankruptcy. To illustrate, let’s say a judgment lien worth $18,000 has been filed against your home, in which you have $20,000 in equity, with an outstanding mortgage of $150,000. In this case, the amount of equity protected by the homestead exemption (all $20,000) would be reduced by $18,000 by the judgment lien. As a result, a bankruptcy filing could allow you to avoid that lien.
There are exceptions to the occasions in which you may avoid a judgment lien against your home, and important procedures must be completed before such liens can be avoided. Speak with an attorney as soon as possible with any questions.
If you are facing a growing amount of credit card debt in Maryland, find out if you might be a good candidate to eliminate that debt and start fresh through a bankruptcy filing by contacting the compassionate and experienced Germantown bankruptcy law firm Haeger Law for a consultation on your case, at 888-463-3520.