Dallas Judgment Lien Avoidance Attorneys
Helping Texas Clients Remove Judgment Liens Through Bankruptcy
When someone files a lawsuit against you, they are likely seeking some form of monetary compensation. This can be common if a creditor is attempting to forcibly collect on an outstanding debt. Should a court rule against you, a judge might place what is called a “judgment lien” can be placed on your property to compel you to pay back the creditor.
The judgment lien entitles the creditor to a certain amount of the proceeds from a sale of the impacted property. For example, if you lose a lawsuit and have a judgment lien placed on your home, you will have to pay the creditor a percentage of the sale, dictated specifically by the lien, when you eventually sell your home. Judgment liens can become problematic if you are in a fraught financial scenario, as they limit your ability to liquidate affected property.
The process of removing a judgment lien on a property is inherently complex and will likely require the services of qualified and experienced legal representation. Our Dallas judgment lien avoidance lawyers at The Law Office of Truman E. Coe, P.C. can help you explore whether you may be able to remove your judgment lien through bankruptcy. We have over 40 years of combined experience and can explore every possible solution to minimize your judgment lien’s impact.
Types of Liens in Texas
Unless the debtor is prudent and has taken measures to safeguard his assets, there is a risk that the creditors can seize assets and take your wealth. In order to know if your assets are at risk, it is imperative that you have an understanding of the different types of liens you may encounter in the state of Texas:
- Purchase-Money Security Liens
- Non-Purchase-Money Security Liens
- Mechanic's Liens Tax Liens
What Kinds of Property Can Receive a Judgment Lien in Texas?
Some states permit judgment liens to be assigned to many types of property. Any property that does not fit in the category of real estate is considered personal property. This includes vehicles, jewelry, collectibles, art, or other possessions.
The state of Texas does not allow judgment liens to be placed on personal property. A judgment lien can only be placed on real estate property. This can include your house, apartment, condominium, or any piece of land you own.
Once a judgment lien has been authorized, a creditor will file the judgment with the county clerk in the Texas county where the impacted real estate is located. If you do not currently own property, judgment lines can be filed in counties where it is anticipated you may own property in the future. Once the judgment is registered and in place, it will persist for 10 years in Texas.
This will inevitably make any sale of your real estate more challenging and less beneficial, as you will owe a proportion of the proceeds defined by the judgment lien to the creditor. There are some limits protecting borrowers, however. If a judgment lien is being attached to your primary residence, a fixed amount of monetary value is untouchable thanks to the state’s homestead exemption. A judgment lien also cannot conflict with other lien attached to the property, so you should not face a situation where you have multiple liens weighing down a single piece of real estate.
Can a Judgment Lien Be Removed Through Bankruptcy?
In short, yes, you can remove a judgment lien from your real estate property through bankruptcy if you meet certain conditions. It is worth pointing out that a judgment lien can be removed if you become able to pay the associated debt. Should that not be possible, you will likely need to explore if bankruptcy makes sense for you.
You can potentially remove a judgment lien by successfully completing either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Most individuals will qualify for one or the other. If your average income is below the average median income for your household in the state of Texas, you automatically qualify for Chapter 7 bankruptcy under the Means Test. If your income exceeds the median, you will have to calculate your disposable income by subtracting living expenses from your take home pay. If there is sufficient disposable income to at least partially repay creditors, you will likely need to file Chapter 13 bankruptcy, instead. We can help you determine your eligibility.
Chapter 7 bankruptcy includes a liquidation process in which your nonexempt property is placed in a trust. A trustee assigned by the bankruptcy court will sell, or liquidate, this nonexempt property to pay off a portion of your debts.
You may be wondering if Chapter 7 bankruptcy defeats the purpose of trying to avoid a judgment lien. After all, there is little point in trying to eliminate the consequences of a judgment lien if you lose your home or real estate property to liquidation in the process.
The state of Texas offers a generous homestead exemption that enables most residents the ability to exempt an unlimited value on their primary residence, meaning your home will be safe from liquidation in most circumstances. Things might get trickier if you own multiple homes or real estate properties. Our Dallas judgment lien avoidance attorneys can assess your situation, regardless of complexity, and help minimize the impact of liquidation.
Chapter 13 bankruptcy omits liquidation and instead features a reorganization of debt into a single monthly payment plan. The bankruptcy court will use your disposable income to determine your ability to repay a portion of your consolidated debts over a period of 3 to 5 years. Chapter 13 bankruptcy will inevitably prolong the process of avoiding a judgment lien, but keep in mind new liens will likely not be able to be placed in your property so long as you are in bankruptcy. Other collection actions, including creditor harassment and foreclosure, will also not be able to be pursued so long as you keep to your repayment plan.
Requirements for a Judgment Lien To Be Considered Dischargeable
Filing for bankruptcy alone will not entitle you to avoid a judgment lien placed on your property, even if you complete all of the required elements and are permitted to discharge some debts. You and your legal representation should promptly file a motion to avoid a judgment lien with the court after filing for bankruptcy. (Some bankruptcy courts will be lenient in allowing you to file such motions later on, but the sooner the better.)
Your judgment lien must pass two sets of criteria in order to be eligible for avoidance. First, it must be considered a dischargeable debt under the bankruptcy code. Then, you will need to prove it qualifies for lien avoidance.
To be eligible for avoidance, your judgment lien must not be the result of any of the following:
- Unpaid child support or alimony
- Money owed to the IRS (also known as back taxes)
- Unpaid death or injury awards triggered by a driving under the influence (DUI) conviction
- Defaulted student loans (though some exceptions exist)
- Any fees, fines, court costs, or restitution owed to the government
If your judgment lien is not the result of any of these actions, you have passed the first step. However, in order to be truly “nondischargeable,” the creditor involved with the lien must not file a valid objection with the bankruptcy court.
The creditor associated with your judgment lien can potentially object to your motion to avoid if:
- The lien stems from an injury brought about by a deliberate or malicious act, including most violent crimes
- The lien stems from an act of fraud of embezzlement
Should the creditor fail or decline to file a valid objection and your judgment lien meets the rest of the above criteria, you will be able to explore avoiding the lien. Our Dallas judgment lien avoidance lawyers can work with you to assess the viability of this approach, represent you before bankruptcy court, and manage any objections from your creditors.
Requirements for a Judgment Lien To Be Avoided
Once you have established your judgment lien is dischargeable, the bankruptcy court will decide whether to grant your motion for lien avoidance. First, the judgment lien must be nonconsensual. You can technically agree to a consensual judgment when negotiating with a creditor to resolve a payment dispute. You will not be able to avoid these types of judgment liens. If you did not choose to have a lien placed on your property, it is a nonconsensual judgment.
To avoid your judgment lien, you will then have to prove the following:
- The lien was a nonconsensual, monetary judgment issued against your property
- You have property equity on the impacted property you can claim an exemption against
- The judgment lien against the property currently prevents you from exercising that exemption
If all of these things are true, you may be able to avoid the judgment lien and get it removed from your property upon completing Chapter 7 bankruptcy or Chapter 13 bankruptcy. If this all sounds extremely complicated, you are right: Judgment lien avoidance is one of the most labyrinthine areas of bankruptcy law and should not be attempted alone.
We Can Help You Avoid Judgment Liens
A judgment lien is not something you want attached to your real estate property if you can help it. Regardless of the reason it was issued, a lien can make selling your home or real estate more difficult. Because it is also one of the most difficult things to remove in a bankruptcy, you will likely need the help of experienced legal representation. Our Dallas judgment lien avoidance attorneys are prepared to assist you and determine if your judgment lien can potentially be removed through Chapter 7 bankruptcy or Chapter 13 bankruptcy. We can assist in filing the motion for lien avoidance with the bankruptcy court and help manage any issues or objections that may arise. At The Law Office of Truman E. Coe, P.C., we strive to give each of our clients the individualized attention and empathy they deserve. We will do everything possible to ensure a positive outcome in your case.