If you have a judgment or multiple judgments that have been entered against you, then you may be wondering if you can discharge or get rid of your liability on those judgments in a bankruptcy case. This blog will explore the effect of an entered judgment in your bankruptcy case and the lien placed on real property by that judgment.
The Bankruptcy Discharge and an Entered Judgement
A judgment being entered by a court does not prevent you from discharging that judgment in your bankruptcy case. The bankruptcy discharge will prevent the judgment creditor from pursuing you for a monetary recovery, since it eliminates your monetary obligation to that creditor. However, depending on the underlying facts of the judgment, a creditor may be able to file an action seeking to exempt it from discharge or it may be the type of judgment that cannot be discharged. Examples of debt that automatically cannot be discharge include student loans and domestic support obligations. It is important to note that if the judgment was litigated, then the underlying facts that have been found in the action will be binding in a litigation in the bankruptcy court.
The Bankruptcy Discharge and Lien on Real Property
A bankruptcy discharge does not automatically void a judgment lien on your real property. You will be able to avoid the judgment lien on your property to the extent that it, “all other liens on the property; and the amount of the exemption that the debtor could claim if there were no liens on the property; exceeds the value that the debtor’s interest in the property would have in the absence of any liens.” A debtor is entitled to claim an exemption of $23,675 in residential real property, which can be doubled in a joint bankruptcy case for residential real property jointly owned by the debtors. Therefore, if you have significant equity in the property, you will not be able to void the judgment liens. However, if there is limited equity in the Property above the liens on the real property that amounts to less than your allowed exemption, then you can void the lien in your bankruptcy case.
If you are considering filing for bankruptcy, it is important to contact an experienced New Jersey bankruptcy attorney to guide you through your options and present you with the potential pitfalls. For questions regarding a potential bankruptcy, call the law firm of Scura, Wigfield, Heyer, Stevens & Cammarota, LLP for a free consultation.