Will Filing For Bankruptcy Help Me If I already Have A Judgement?

Human nature unfortunately provides that most people will wait until the very last possible moment to take action in order to stop collection efforts of creditors. Some people wait until they find out they have a judgement against them already until they visit with a debt relief professional. Waiting until you have a judgement against you is not advisable because you could have your wages garnished and if you own real estate, you could face having a creditor put a lien on your property. If no lien has been placed on your property, then the debt will probably just be discharged after a bankruptcy filing if it is related to an unsecured debt.

Will filing for Bankruptcy Help?

When you have a lien placed on your property you will need to take a look at how much equity is in your property, the amount of exemptions used to protect your property and the amount of the judgment lien. If a lien has been placed on your property then you may be able to file a motion to avoid the lien after filing for bankruptcy under Section 522 of the federal bankruptcy code. Of course the extra cost and effort to avoid having to file such a motion can be avoided if you file your case before such a lien is placed on your real property. If you do have to file a motion to avoid the lien, then you would be successful if the lien impairs a bankruptcy exemption.

So how does a lien impair an exemption? The Bankruptcy Codes sets for a formula to determine if an exemption is impaired. Under the bankruptcy code, if the lien to be avoided and all other liens on the property and the debtors’ exemption exceed the value of the debtors’ property, the exemption is impaired and the judgment lien can be avoided in its entirety.

So how does this work? In Washington state we can exempt up to $125,000 of equity in a home. So if the judgement lien is worth $20,000 + $200,000 mortgage + $125,000 exemption = $345,000. If your property is worth $340,000, then the exemption has been impaired and you may avoid the judgment lien and the judgement lien will then be treated as an unsecured debt.

If you have additional questions about whether filing for bankruptcy help you, please contact Symmes Law Group at 206-682-7975