Prevent Future Judgment Liens

Posted by Kevin on September 19, 2019 under Bankruptcy Blog | Comments are off for this article

Bankruptcy can prevent future judgment liens. It usually stops a lawsuit from turning into a judgment, and then a judgment lien on your home. 

 

Judgment Liens Are Dangerous

Our last blog post was about how filing bankruptcy can sometimes remove, or “avoid,” a judgment lien from your home. This is a great potential benefit of bankruptcy if a judgment lien has already been recorded.

But it is often much better to file a bankruptcy case before a judgment lien hits your home’s title. Here are a few of the practical reasons why:

• You have to meet certain strict conditions to be able to avoid the judgment lien. If you don’t meet them, even bankruptcy won’t get rid of that lien on your home. You may have to pay all or part of the debt in spite of filing bankruptcy.
• Even if you succeed in avoiding the lien in your bankruptcy case, it is an extra step that can cost you more. And the cost can go up substantially if the creditor fights your lawyer’s efforts to avoid the lien. Besides higher lawyer fees, you may have to pay for a home appraisal and for the court testimony of the appraiser.
• The existence of a judgment lien adds uncertainty, and thus some extra anxiety, to your bankruptcy process. The goal of bankruptcy is relief. So it’s better to prevent a judgment lien from hitting your home than messing with it after it has hit.

Judgment Liens Are Preventable

Filing bankruptcy usually stops an ongoing lawsuit against you from turning into a judgment. Bankruptcy’s “automatic stay” immediately stops “the… continuation… of a judicial, administrative, or other action or proceeding against the debtor…  .”

Filing bankruptcy also usually prevents future lawsuits against you from being filed much less turning into judgments. The automatic stay” immediately stops “the commencement… of a judicial, administrative, or other action or proceeding against the debtor…  .” Section 362(a)(1) of the U.S. Bankruptcy Code.

The exceptions are debts that cannot be written off (“discharged”) in bankruptcy, such as certain ones based on fraud, income taxes, child or spousal support, most student loan debt and criminal behavior. But bankruptcy does discharge most debts. So filing bankruptcy will stop ongoing and future lawsuits on most of your debts. And it will prevent those debts from turning into dangerous judgment liens on your home.

The Timing Can Be Crucial

You know when things are going south financially.  You are making no more than minimum payments on your credit cards.  You miss payments here and there but convince yourself that you will make it up next month.  But you don’t make it up.  Debt collectors are calling daily.  And the dunning letters are also coming in.  You could bury your head in the sand and that will lead to lawsuits, judgments, and judgment liens on your home.

Most times, it is best to be proactive.  At the very least, you should be seeking out an experienced bankruptcy attorney to analyze your situation and let you know whether bankruptcy can be an effective tool to deal with your creditors.