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Avoiding Judgment Liens as a Debtor

Judgment liens in California stay attached to your property for 10 years, even if the property is transferred to someone else. While a bankruptcy discharge can get rid of your personal liability for a debt, it does not get rid of a lien unless you purposefully “avoid” or remove the lien.

Certain requirements must be met to avoid a judgment lien. A judgment lien can be removed if the debt existed at the time you filed for bankruptcy, you are entitled to claim an exemption in some of your property’s equity, the lien impairs exempted equity to which you would be entitled if the lien did not exist, and the lien resulted from a money judgment awarded by the court. If these elements are met, you can remove the judgment lien from exempt property, even real estate. The lien may not have arisen consensually in the course of a creditor extending you credit to buy something. A lien is considered to “impair” exempted equity if you are not able to take the full exemption because the lien has been placed on a particular piece of property.

In most cases, it is more straightforward to avoid a lien on property if the property is completely exempt. Otherwise, you may have to pay the amount remaining on the lien, and this can affect your ability to enjoy the “fresh start” available under bankruptcy laws. Your attorney will look at the value of the asset that would be exempted, the amount of senior liens, when the lien attached, and the amount of exemptions available to you in California. It is important to let your attorney know about the judgment lien before you file so that the attorney can approach this issue strategically. In most cases, you may ask the court for lien avoidance by filing a motion during your bankruptcy case, although it may be possible to reopen your case and get the lien avoided later.

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