Avoiding a Judgment Lien through Bankruptcy
Among the many reasons to consider filing for bankruptcy sooner rather than later is to avoid letting your unsecured consumer debts become secured. Once unsecured debt becomes secured by a lien, your creditor will become a partial owner of that property, with the potential power to require that your property be sold to satisfy the debt. However, you may have options for nevertheless eliminating these secured debts through the bankruptcy process. Read on to learn more about lien avoidance.
If you’ve been struggling to keep up with your rising debt for some time, you may have been sued by a creditor at one time based on an unpaid debt. When a creditor sues and obtains a judgment in their favor, the creditor will then record that judgment with the local county recorder. The judgment can then become a lien against real estate you own in the county where the judgment was recorded, or against other personal property you own, such as a car. When there is a lien against your property, you are not considered to own the property outright, and you may not sell that property, until you pay off the debt that resulted in the lien. It is in this way that unsecured debt can become secured.
During the bankruptcy process, you may be able to eliminate a judicial lien against your property if it impairs an exemption to which you’re entitled through bankruptcy. One common example is the avoidance of judicial liens on your home through the homestead exemption. Bankruptcy petitioners are permitted to make a certain amount of the equity they’ve built up in their home exempt from being used to pay back creditors. If a judicial lien would diminish the amount of equity you retain in your home below the maximum legally-permitted amount, you may be able to avoid (i.e., eliminate) that judgment lien. For example, say your house is worth $450,000, you’ve built up $45,000 in equity, and your homestead exemption amount is $50,000. If there is a judgment lien against your home in the amount of $10,000, you may be able to eliminate that lien through bankruptcy, since it would interfere with your right to make $50,000 in home equity exempt under bankruptcy. There are certain types of liens that are not subject to this exemption. Speak with a California bankruptcy attorney as soon as possible to find out if bankruptcy could help you avoid liens filed against your property.
If you are in need of assistance in dealing with mounting consumer debt and are considering whether bankruptcy might be the right solution for you, contact the seasoned and compassionate Ventura bankruptcy lawyers at Rounds & Sutter for a consultation, at 805-650-7100.