A Creditor With A Judgment May Have A Lien Against Your Home
Do you know what a property lien is? If at the time you file bankruptcy you own real property such as a house or a bare land lot, the first thing you need to know is that it is possible for a creditor with a judgment to have a lien on the real property.
That means that if you file a bankruptcy and receive a discharge of that debt, the lien remains attached to the house!
If you keep the house and do nothing, then the lien remains attached to the house. You will have to pay/settle the debt if/when you sell or refinance the house. Also, there are situations when the creditor can actually foreclose on your house to get paid on the debt.
What Are Your Options In Dealing With A Judgment Lien
Do not despair. You do have some options to deal with the judgment lien.
First, if you dont want to keep the house, then you dont have to do anything. When the house is foreclosed on by the mortgage company, the lien goes with it .
If you want to keep your house, then there is good news. The Bankruptcy Code allows a debtor to disconnect or remove a judgment lien against a debtors home to the extent that it impairs an exemption to which the debtor would have been entitled in the absence of the lien. What this effectively means is that if the debtor does not have more equity in the home that can be exempted in the bankruptcy from the claims of creditors, then the debtor can have the court enter an order that removes the lien.
Here is are two examples:
Example 1: The house is worth $200K. The first mortgage debt is $150K. That means there is $50K equity in the house. The judgment lien is for $110K. This debtor lives in Washington State and chose the Washington homestead exemption of $125K. Because the debtor can easily exempt the $50K equity in his home , and the $110K judgment lien impairs the exempt equity, the debtor can disconnect/remove the judgment lien from the home.
Can A Creditor Collect On A Writ Of Garnishment
This means that a creditor can collect on business debt effectively forever, or until the debt is satisfied. In addition to that, once a court approves the garnishment, there is no expiration on the Writ of Garnishment presented to the bank. This means a creditor can collect on debt as long as it takes to satisfy it.
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What Can You Include In Chapter 7 Bankruptcy
When you file for Chapter 7 bankruptcy, you can discharge numerous debts, but not every single one. Debts including child support, federal student loans, or past due taxes are excluded from this discharge. Furthermore, some assets might require liquidation before you can proceed to the debt discharge phase.
Deciding to file for Chapter 7 bankruptcy is a big decision and not one you should do lightly. While it is a way to have a fresh financial start, it comes with costs. Furthermore, you cannot include all types of debts. Therefore, if you have too many debts in the excluded category, you will want to discuss different bankruptcy options with your attorney.
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Dischargeable Debt And Judgment Liens
If you have a judgment lien associated with a dischargeable debt and you file for bankruptcy, you’re in luckthe debt will get wiped out. The creditor won’t be able to take action to collect directly from you.
However, it’s important to understand that the debt and the lien created by a judgment are two separate things. While you can eliminate the dischargeable debt, you’ll need to take additional action to remove the lien. Bankruptcy won’t automatically cause the lien attached to your property to disappear.
Why is this a problem? As long as t lien remains in place, the creditor will have an interest in the property it attaches to. The creditor can force a property sale or wait until you sell it and get reimbursed from the proceeds.
If you don’t take action, the judgment will continue to impair your property until it’s paid in full or the judgment expires. The active period for a judgment varies by state. A good average is ten years, often with an option to extend the judgment for an additional ten years.
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Removing A Judgment Lien From Your Property
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As a general rule, liens placed on your property prior to filing will survive after bankruptcy. There are exceptions to this rule!
Your attorney can avoid some liens using tools built into the bankruptcy code. Still other liens can be satisfied after you have received your bankruptcy discharge by using Wisconsin law.
Bankruptcy cant get rid of every judgement lien, but there are many types of judgment liens that can be eliminated through bankruptcy. It is important to consult with an attorney to determine if these laws can help you.
For more information regarding elimination of certain liens, schedule a free appointment with Attorney Steven R. McDonald today to discuss your bankruptcy options.
Failure To List A Creditor In Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, creditors are typically much more involved than in a Chapter 7. Your creditors will have the opportunity to review and object to your repayment plan. Once your plan is approved, your payments will be divided proportionally among your creditors.
If you leave a creditor off of your Chapter 13 bankruptcy, that debt wont be included in the bankruptcy and it wont be discharged at the end. That means the creditor can attempt to collect from you after your bankruptcy discharge.
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Bankruptcy As An Option After An Accident
If you are financially responsible for a car accident you need to take a look into all the options that are available for you. One of the options is that you may be able to file for bankruptcy to discharge those debts depending on your circumstances. Normally your debts related to a car accident are dischargeable. This is true whether the debts are related to personal injury or property damage. You would simply list the debt in a chapter 7 bankruptcy and the debt would be discharged.
There are two exceptions where the debts arising from a car accident are not dischargeable in bankruptcy.
Your Previously Underwater House Has Increased In Value
It is also worth noting the impact of the recovery of the housing market and home values. After the 2008 real estate crisis, home values decreased significantly. At that time, many debtors homes were underwater and had negative equity . Many debtors were not sure if they wanted to keep their underwater house.
As a result, many debtors elected to not have a motion to avoid a judgment lien filed because such a motion normally costs extra and the cash-strapped debtor did not want to pay the fees to have a motion filed to get rid of a judgment on a house that they were not even sure they were going to keep.
Now, with home values increasing, debtors/clients are returning and asking for judgment liens to be removed. As noted above, that can be done you just reopen the case and file the motion as usual. Normally, the attorney fees to file the motion to avoid the lien is the same now as it would have been back when the case was still open. However, the debtor has to pay the filing fee and any attorney fees associated with the motion to reopen.
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How Do You Avoid Liens In Bankruptcy
To get avoid a judgment lien in bankruptcy, you have to prove three conditions to the court:
Avoiding a lien requires that you claim in your bankruptcy filing your right to exempt equity in your property. You must demonstrate that you need an exemption to release equity that is taken up by the lien. You must also file a lien avoidance action in the bankruptcy court in a timely manner.
If you have more equity in your property than you can exempt, the creditor might argue that the lien is valid. In that case, the lien remains up to the exemption amount. The likelihood of this becoming a problem for you depends on whether you file for Chapter 7 or Chapter 13. If you decide to not take any action, the lien will remain in place. Your creditor will have rights to your property after the close of your bankruptcy case.
However, even if you havent filed to avoid the lien before your case is closed, all hope is not lost. Most courts will allow you to file a motion to avoid the lien before or even after your bankruptcy case is closed.
Revocation Of The Confirmation Order
Revocation of the confirmation order is an undoing or cancellation of the confirmation of a plan. A request for revocation of confirmation, if made at all, must be made by a party in interest within 180 days of confirmation. The court, after notice and hearing, may revoke a confirmation order “if and only if the order was procured by fraud.” 11 U.S.C. § 1144.
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The Creditor Mailing List
Your Creditor Mailing List, also sometimes called a mailing matrix, must include all of your creditors and their contact information. That includes debts that wont be handled through the bankruptcy process, such as student loan debts. The court uses that list to send your creditors a notice that youre filing a bankruptcy. Thats important for creditors because they may want to be involved in the process.
Depending on the type of bankruptcy you file, your creditors may need to be involved in the reaffirmation of your debts, the payout of any liquidated assets, or the approval of a payment plan. In order to get their portion of the repayment, a creditor needs to file a proof of claim. If they dont get notice, they have no way of filing a proof of claim and get shut out of your bankruptcy.
Not only is the creditor mailing list important to your creditors, its important to your case. When you file, you get the protection of the automatic stay. That means all collection efforts have to stop. Creditors cant follow the automatic stay if they dont know youve filed. In addition, leaving a creditor off your list can affect the outcome of your bankruptcy.
Do Judgments Impact Your Credit
For many years, judgments and liens appeared in the public records section of credit reports, but that is no longer the case. Bankruptcies are now the only public records collected and listed on credit reports maintained by the three national .
Chapter 7 bankruptcies appear on your credit reports for 10 years from the date of the bankruptcy filing, while Chapter 13 bankruptcies remain for seven years from the filing date.
A bankruptcy negatively affects your credit score as long as it remains on your credit report, but its impact diminishes over time. Since judgments and liens no longer appear on credit reports, they have no effect on credit scores.
Legal judgments and their consequences, including garnished wages and drained bank accounts, can compound the distress of mounting debt. Filing bankruptcy is stressful in its own right, but it can bring instant relief from judgments, in many cases eliminating them permanently.
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Can I Base A Bankruptcy Notice On 2 Judgments From Different Creditors
No. However, you can use 2 or more judgments for debts owed to the same creditor to apply for a bankruptcy notice.
Throughout the process of making someone bankrupt you must lodge certain documents, commonly:
- bankruptcy notice application – using our online services
- creditors petition – endorsed by the court
- trustee consent to act declaration- using Form 12.
- sequestration order – made by the court.
How Can A Creditor Use A Judgment Against You
How the Creditor Can Use the Judgment. Under state law, a judgment is a lien on property, which opens up a host of possibilities for creditors. If your state allows it, the judgment can file a levy with the court and your employer, instructing the employer to garnish a portion of your wages, to pay the creditor with.
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Filing For Bankruptcy Before Receiving A Nondischargeable Judgment
If you get served with this type of lawsuit, you might stand a better chance of avoiding a nondischargeable judgment by filing for bankruptcy early in the case. Not only will doing so stop the trial, but youll be off the hook unless the plaintiff files and wins a new action in bankruptcy court. If youd like to learn how likely it is that the plaintiff will pursue you in bankruptcy, read Will Filing for Bankruptcy Stop a Civil Lawsuit?
The Us Trustee Or Bankruptcy Administrator
The U.S. trustee plays a major role in monitoring the progress of a chapter 11 case and supervising its administration. The U.S. trustee is responsible for monitoring the debtor in possession’s operation of the business and the submission of operating reports and fees. Additionally, the U.S. trustee monitors applications for compensation and reimbursement by professionals, plans and disclosure statements filed with the court, and creditors’ committees. The U.S. trustee conducts a meeting of the creditors, often referred to as the “section 341 meeting,” in a chapter 11 case. 11 U.S.C. § 341. The U.S. trustee and creditors may question the debtor under oath at the section 341 meeting concerning the debtor’s acts, conduct, property, and the administration of the case.
In North Carolina and Alabama, bankruptcy administrators perform similar functions that U.S. trustees perform in the remaining forty-eight states. The bankruptcy administrator program is administered by the Administrative Office of the United States Courts, while the U.S. trustee program is administered by the Department of Justice. For purposes of this publication, references to U.S. trustees are also applicable to bankruptcy administrators.
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Who Can File A Plan
The debtor has a 120-day period during which it has an exclusive right to file a plan. 11 U.S.C. § 1121. This exclusivity period may be extended or reduced by the court. But in no event may the exclusivity period, including all extensions, be longer than 18 months. 11 U.S.C. § 1121. After the exclusivity period has expired, a creditor or the case trustee may file a competing plan. The U.S. trustee may not file a plan. 11 U.S.C. § 307.
A chapter 11 case may continue for many years unless the court, the U.S. trustee, the committee, or another party in interest acts to ensure the case’s timely resolution. The creditors’ right to file a competing plan provides incentive for the debtor to file a plan within the exclusivity period and acts as a check on excessive delay in the case.
Only the debtor may file a plan in a subchapter V case. 11 U.S.C. § 1189.
Can You Put A Judgement In Bankruptcy
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Can You Put A Judgement In Bankruptcy. You have to actively work to get the court to garnish wages, put a lien on a property, or initiate an installment payment plan. How to handle a default judgment in 3 steps.
Such proceeds may be from a bankruptcy, a consumer proposal, a judgement or a restitution order against the borrower and/ or the guarantor. You will have to pay a filing fee. Once the judge signs the judgment, you an file it it with the clerk of the court and with the state department of state. Congress then changed the law: A petition for a discharge in bankruptcy in a liquidation proceeding may be filed by.
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Should You File Bankruptcy
It depends on your situation.
The best way to deal with the matter is to talk to a bankruptcy lawyer as soon as possible. A lawyer advises you about your bankruptcy options and helps you decide whether filing a bankruptcy case to stop a lawsuit or get rid of a judgment is in your best interest. You can estimate the cost and qualification. You can also have a local bankruptcy attorney review the information provided for free. We partner with bankruptcy lawyers throughout the United States. All our partners offer free bankruptcy consultations. You can get the advice you need free of charge with no obligations.
Remember, the quicker you act, the more options you might have for dealing with the problem. However, if you ignore the matter, the situation could become worse, and you could lose money or property unnecessarily.
If you have questions or want to speak with someone now about debt problems, please contact Ascend by calling 833-272-3631.
Debts That Are Difficult To Discharge In Bankruptcy
Student loans are notoriously difficult to discharge through bankruptcy it is only possible if you can demonstrate undue hardship to yourself or your dependents, such as being unable to maintain a minimal standard of living. In some cases, a court may discharge part, but not all, of your student loan debt. If student loan debt is a major reason for your considering bankruptcy, contact your loan servicer first and see if itâs possible to negotiate a repayment plan that would work for you. In the case of federal student loans, for example, several repayment plans are available.
You cannot have income tax debts discharged without a special exemption, which can only be obtained by petitioning the bankruptcy court and explaining why you deserve relief. So if you have income tax debts that you cannot repay, then you may be better off consulting with a tax attorney to discuss your options before filing for bankruptcy.
In the case of federal taxes, for example, the Internal Revenue Service can offer several alternatives to people who are unable to pay what they owe. One is an offer in compromise, in which the IRS agrees to accept a lesser amount. The IRS may also arrange for a payment plan, or an installment agreement, that will allow you to pay your taxes over an extended period of time.
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