Avoiding Judicial Liens in Chapter 7 Bankruptcy – San Diego Bankruptcy Attorney
Oftentimes, after a person is sued for a collection debt and judgment is entered, the plaintiff in that lawsuit will file a document which places a judicial lien on property owned by the defendant. This is typically referred to as a judgment lien. What most people do not realize, however, is that judgment liens are often completely avoidable in Chapter 7 bankruptcy, so long as certain requirements are met.
The power to avoid judicial liens is found in the United States Bankruptcy Code, 11 U.S.C. §522(f)(1). Generally, a judgment lien may be removed, or avoided, if: (i) the lien is a judicial lien; (ii) the lien is fixed against an interest in the debtor’s property; and (iii) the lien impairs an exemption to which the debtor would otherwise be entitled.
Most of the time, the first two requirements are met; however, it is important to note that certain statutory liens, such as mechanics’ liens are unavoidable in bankruptcy. The third requirement, that the judicial lien impair an exemption to which the debtor would otherwise be entitled, is different for each debtor and dependent on the jurisdiction in which the debtor is filing Chapter 7.