Most people know that if a creditor obtains against a judgment against you they can garnish your paycheck or levy (freeze) your bank account. However, creditors may also place a lien against your home. Often, our clients do not even know these liens exist until we tell them, or they try to sell or refinance their homes. Although a bankruptcy will eliminate your personal liability regarding the judgment, unless your attorney takes additional steps to remove the judicial lien it will continue to encumber the property until it is paid.
In a Chapter 7 Bankruptcy, your attorney can file a Motion to Avoid Judicial Lien pursuant to 11 U.S.C. § 522(f). This section allows Debtors to avoid a judicial lien that impairs an exemption in the property. In Missouri, Debtors may exempt $15,000.00 of equity in their homestead (Rs.MO 513.475). So, if you have less than $15,000.00 of equity in your home you can avoid a judicial lien in full. If you have more than $15,000.00 in equity, you may still be able to avoid a portion of the judicial lien. It is important that you speak with an experienced bankruptcy attorney that is familiar with the lien avoidance process to ensure your judicial lien does not survive the bankruptcy.
In a Chapter 13 Bankruptcy, your attorney can also file a Motion to Avoid Judicial Lien pursuant to 11 U.S.C. § 522(f). If the Motion to Avoid Judicial Lien is not filed and your creditor files a secured claim, this will cause the judgment to be paid in full through the Chapter 13 Bankruptcy. To repay this amount in full, your monthly Chapter 13 Plan Payment will be higher than it should have been, or your plan will no longer be feasible and you will not be granted a discharge. Make sure you do not spend years paying money to creditors that don’t have to receive it, or worse, lose your discharge. Contact one of our experienced St. Louis bankruptcy attorneys today.