Receiving a judgment lien can feel very intimidating, especially when you are already in a difficult financial situation. That is why you may be wondering how bankruptcy affects judgment liens in Ohio.
Has a creditor won a lawsuit against you and now has a judgment lien? If so, check out this article, where we will discuss judgment liens, bankruptcy in Ohio, and what your discharge options are.
What is a Judgment Lien?
Before we discuss how bankruptcy impacts property liens, what exactly is a judgment lien? A judgment lien is a claim against you that has been initiated by a creditor or a personal injury case plaintiff.
Creditors specifically have the option of filing a lawsuit against you if you haven’t paid off your debt and the creditor doesn’t want to pursue other types of collection actions.
If the creditor’s lawsuit is successful, the judge can issue a judgment lien that attaches to your property, such as a home. If this were to happen, you most likely wouldn’t be able to sell your home until you paid back the lien.
How Bankruptcy Affects Judgment Liens in Ohio
If you have a judgment lien in Ohio, the good news is that bankruptcy can often discharge this type of debt. That is why some Ohio residents may choose bankruptcy as their best option if they need to get out of substantial debt.
However, it’s important to remember that different types of bankruptcy handle debt in different ways. So, here is an overview of how Chapter 7 and Chapter 13 bankruptcy address judgment liens in Ohio.
Chapter 7 Bankruptcy
Although it is possible to have a lien discharged through bankruptcy, you can’t assume that this is something that will happen automatically. For example, if you qualify for Chapter 7 bankruptcy, you will need to file a motion to avoid, which can help to strip any judgment liens filed by your creditors. For this process to work, the lien has to be unsecured, which usually requires the real estate equity to be evaluated.
The good news is that when you file for bankruptcy, you can use exceptions for real estate, which usually means that, in most cases, the judgment lien will be considered to be unsecured.
Chapter 13 Bankruptcy
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy is a repayment plan type of bankruptcy that allows you to pay back many of the debts that you owe over a 3 to 5 year period. So, any judgment lien you have against you will usually be considered when your repayment plan is determined. And when you reach the end of your payment plan, anything remaining, such as an unsecured lien, can be discharged.
Keep in mind that you could face legal action if you fail to maintain your Chapter 13 repayment plan. Staying up-to-date with your payment is essential for keeping your bankruptcy case open until it’s completion.
Can a Judgment Lien Be Removed?
In many circumstances, you can use bankruptcy as a way to have a judgment lien removed from your property. The most common way of achieving this is to file a motion to avoid, which allows you to use exemptions so that the lien is considered to be unsecured.
This process is also called lien avoidance, as it helps you avoid having to pay to have the lien removed. Lien avoidance is an option if the lien is attached to property under either a federal or Ohio exemption. Both federal law and Ohio law have a homestead exemption that you can use to do this, as well as a wild card exemption.
When you work with a bankruptcy attorney in Ohio, they can help you better understand what exemptions you may qualify for. This is a crucial step in the bankruptcy process since it can often help you protect many of your assets.
Situations Where a Judgment Lien May Remain
Bankruptcy can often remove a judgment lien in Ohio, as long as you use the right bankruptcy process. However, there are situations where this may not be possible.
The most common example of when a judgment lien must remain is if it is a criminal judgment against you. These types of judgments are usually non-dischargeable, meaning that they will still be your responsibility, even after filing for bankruptcy. But there are some criminal fines and restitution orders that may be dischargeable with bankruptcy.
Additionally, judgment liens attached to property that has significant equity may not be dischargeable through bankruptcy because it is secured. This is usually the case if the property has significant enough equity that the bankruptcy exemptions aren’t enough to cover it.
You should consult with a bankruptcy attorney in Ohio if you aren’t sure if bankruptcy can remove your judgment lien. They will have much more experience in this area and may have additional solutions that you can use.
FAQ Section
Does bankruptcy automatically remove a judgment lien?
No, there are additional steps you will need to take when filing for bankruptcy if you also have a judgment lien you want removed.
Can I sell my home if a judgment lien remains?
Selling a home that has a judgment lien against it is a possibility in Ohio depending on the circumstances. However, the lien usually needs to be resolved first, or the proceeds from the home may need to be used to pay off the lien.
What is lien avoidance?
This is a court procedure that can help remove qualifying judicial liens.
Will every judgment lien qualify for removal?
No. Some types of judgment liens don’t qualify for removal through bankruptcy due to either the nature of the judgment lien or because it is secured.
Hire a Bankruptcy Attorney in Ohio
If you have a judicial lien in Ohio, you may be able to get this discharged by following the right bankruptcy process. Richard P. Arthur, Attorney at Law, has extensive experience handling bankruptcy cases in Ohio and can help you determine whether or not you can have your judgment lien discharged. To proceed with your case, contact us today at 937-254-3738 for a free consultation.