Many clients who come to our office have creditors that hold judgments against them. Often when a Debtor owns real estate, the judgment creditor will record a Certificate of Judgment in the Probate Court in the county where the property is located. The Certificate of Judgment acts as a lien against all property owned by the Debtor in the county. The lien converts the judgment, an unsecured obligation, into one that is secured. Having a lien against property gives the Creditor extra leverage in their dealings with the Debtor, since the lien gives the creditor the ability to foreclose on the property to which the lien has attached.
Fortunately, under Bankruptcy Law, a Debtor has the ability to avoid or remove the Certificate of Judgment that has been recorded against the property, if certain conditions are met. Under Section 522(f)(1)(A) of the Bankruptcy Code, the Debtor can avoid a judicial lien to the extent that the lien impairs an exemption that the Debtor can claim in the property.
In the State of Alabama, the Homestead Exemption is currently $15,000 for an individual. Thus, if a debtor has less than $15,000 in equity in the property, it may be possible to remove or “avoid” the Certificate of Judgment in its entirety in a Chapter 7 Bankruptcy Case. With the recent decline in the housing market, many homeowners will find themselves having little or no equity in their home. In the context of a bankruptcy proceeding, this actually can benefit Debtors in their ability to wipe out judgment liens against property.
To find out more about Lien Avoidance in a Chapter 7 Bankruptcy Case, call one of the Birmingham Bankruptcy Lawyers at Over the Mountain Law Center today at 205-870-8480. One of our Bankruptcy Attorneys will properly advise you of your rights concerning lien avoidance in Chapter 7 Bankruptcy.