Where do judgment liens come from?
When someone sues you for money, whether for a medical bill, credit card debt, repossession balance, or any other debt, if they win the lawsuit, they get a judgment against you. A judgment is just a court order that says the court agrees that you owe the money to the other party and that they can take action to collect it from you forcefully.
In Indiana, when someone gets a judgment against you, they also automatically get a lien against any real estate that you own in the county where the lawsuit was filed.
What does a judgment lien do?
A judgment lien is just like a mortgage. It is a lien that can attach to your real estate and must be paid before you can sell the real estate or refinance the property.
What can I do to remove a judgment lien?
There are two options:
1) You can pay off the lienholder. Once their debt is satisfied, they will release the lien.
2) You can have the lien “avoided” by the bankruptcy court.
How does lien avoidance work?
The first step is to file bankruptcy under Chapter 7 or Chapter 13 to eliminate your personal obligation on the debt. But that’s not enough…the lien would normally survive unless your attorney successfully files a Motion to Avoid Lien. Most attorneys charge separately for these motions, but it is definitely worth doing to clear up any liens against your home.
Do I have to make the Motion to Avoid Lien at the same time as my bankruptcy?
Not necessarily. You can always reopen the bankruptcy later to avoid a lien, but doing so can get very costly. The bankruptcy court charges a hefty fee to reopen a closed case, so it is much cheaper to avoid the lien while your case is still open.