What are Judgment Liens?
Any court ruling which allows a creditor the permission to take possession of a debtor's real property where the debtor has failed to fulfill his contractual obligations is a judgment lien. A judgment lien permits any creditor to recover their obligation through the debtor's business or personal property including assets such as real estate in order to pay for the judgment. Judgement liens are made against both persons or businesses.
What is the process for Judgment Lien?
If someone files in court and after the hearing a judgment is imposed then the winning party or creditor may record the judgement by filing it and impose a lien against property or assets. Please note in some states a lien maybe automatically assigned to the property upon granting of a judgment.
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What type of property or assets can you attach a lien to?
Real estate liens
A judgment lien can be recorded in the county where there is a property.
Personal property judgment liens
A judgment lien may be set against a personal property but this is much harder to recover since most personal property has no title and it is not possible to record it or enforce it since a party can sell this property before possession is taken.
Vehicle judgment liens
Since motor vehicles do have a title and registration then a judgement lien can be filed with the department of vehicles, DMV, and enforced.
Judgment Liens Can Attach to Later Acquired Property
If you don’t have a property a creditor can still file a judgment lien and once it is recorded it can be attached to any property you acquire in the future. However, in most states a real estate lien expires after 7 to 10 years.
Sometimes nonconsensual lien can be recorded which basically means that you did not agree to the lien being filed, in this case the creditor can force the sale of the asset in order to recover their payment. Though this is seldom practiced due to costly process. However, once the lien is attached and you refinance the property then the lien has to be paid before new title can be recorded. These judgment liens include: execution liens, statutory liens and tax liens. In most cases a judgment lien is created after someone is sued you in court an won a judgment, however these type of liens can be dismissed through bankruptcy.
What is an Execution Lien?
Execution Lien is similar to judgment lien whereas it can be automatically executed. However, this type of lien can also be removed by bankruptcy.
What is Statutory Lien?
Statutory liens available in some states and created by law allow homeowner’s associations and contractor’s working on your house to have a lien on your property in case you fail to pay. These type of liens are only granted on real estate and not personal property or cars.
If you owe taxes to the local, state or federal government then the tax authorities such as IRS can impose a lien on your property or assets to recover delinquent taxes. These authorities can only attach the lien if the property or assets they are attaching to have sufficient equity to pay for the debt and are secured liens. In case there is not enough equity then the lien is unsecured. Most IRS or taxing authority liens can be attached to your real estate, retirement account or bank account . They can attach these liens through the secretary of state’s office or your local county.
Bankruptcies such as Chapter 7 wipes out your personal obligation to repay a secured debt however the creditor’s lien on your property remains unless the property was returned to the original creditor.
What Is a Lien?
A lien is a form of guaranteed that an unpaid debt will be repaid to the credit .
How are Liens treated in Chapter 7 Bankruptcy?
There are two parts in a secured debt included in a chapter 7 bankruptcy.
- 1. If the debt qualifies for bankruptcy then your original debt to the creditor is wiped clean.
- 2. A lien or legal claim attached to a property is not necessarily wiped clean through bankruptcy. However, when going through bankruptcy you can take steps to reduce these claims or have them resolved or wiped.
You should therefore continue to make payments on a secured debt or you will forfeit or lose the collateral in said property if the creditor repossesses the property.
What should Lenders do to perfect their liens?
Lenders must perfect their liens or in another word the liens should be recorded with the state or local record offices in order for it to be considered a secured debt. You may be able to get rid of liens recorded against your property in chapter 7 bankruptcy in certain situations call avoidance or lien avoidance.
What Judgment Liens Can You Avoid?
Only a nonconsensual judgment lien on real estate and cars can be avoided if it meets the following criteria:
- 1. The lien is due to a monetary judgment and approved by a court.
- 2.You can claim an exemption in at least part of the equity in your property.
- 3. The lien could result in a loss of part or all of this equity which is exempt in case it is sold.
You can remove judgment liens from any exempt property if all three of these condition are met.
Should you practice Judgment Lien Avoidance?
As a practice you should always use Lien Avoidance to recover exempt property even if you are not interested in the property since you can always sell this property after it is cleared. Simply practice avoidance from a judgment lien by checking the column “ Property is claimed as exempt” when you file your motion. If you did not know there was a lien at the time you filed you may still be able to do so during the procedure.