Debtors are entitled to avoid judicial lien(s) during bankruptcy, when the judicial lien(s) impair exemptions the debtor would otherwise be entitled, even where no equity exists for the debtors exemption. Both Chapter 13 and Chapter 7 debtors are entitled to this relief.
If the debtor fails to make a motion to avoid the judgment lien(s), the lien(s) will survive the bankruptcy discharge order. A separate motion is required for each judgment lien the debtor wants to avoid.
If the fair market value of your home is less than the total of your secured mortgages and homestead exemption, then you may ask the court to avoid a judicial lien.
A chapter 7 changes the Judicial Lien from a secured claim to an unsecured non priority claim that is included in the Chapter 7 Discharge Order.
A chapter 13 also changes the character of the Judicial Lien from secured to unsecured. In a Chapter 13, there is a plan that pays claim over a 3 – 5 year period of time. The secured claim is paid the same percentage as the rest of the general unsecured claims and included in the Chapter 13 Discharge Order.
In a Chapter 7: A copy of the Court’s Order Avoiding the Lien is filed with the County Recorder to release the lien.
In a Chapter 13: Generally the Judgment Creditor will file a Satisfaction of Judgment; however, if the Creditor fails to do so, the Debtor may file a copy of the Order Avoiding the Lien and the Chapter 13 Discharge Order to release the lien.
In a chapter 13 case the motion is filed on the Petition Date.
In a chapter 7 case the motion is filed any time between the Petition Date and before the Discharge Order is entered.
The burden of proof of the value of the home, the amount of secured liens and the existence of the judicial lien is on the Debtor.
It takes at least 30 days from filing; to obtain an order avoiding the lien unless the creditor opposes the motion, then it can take longer. Due process gives the creditor time to receive, review and oppose the motion.
Postage and copy: In some cases the copy and postage costs can be $200 - $300 or more, it depends on the number of pages of the exhibits and motions and the manner of service and the number of parties required to be served.
Attorney Fees: The court approved attorney fees for a Motion to Avoid (if uncontested) is $750. If the creditor contests the motion then the costs will increase proportionally to the additional services required. Our hourly fees are $350.
Appraisal: You pay the appraiser directly; appraisal costs vary, depending on the property.
