When you are preparing to file bankruptcy, it is best to discuss with your bankruptcy attorney whether you have any judicial liens against your property. These liens, even if the debt is included in your bankruptcy and discharged, can survive the bankruptcy and stay levied against your home.
A judicial lien is secured through a legal process of securing a memorandum of judgment. It can be for nearly any amount of debt, and often stands alone as a significant amount of debt. More than that, even though it is recorded with the appropriate recorder of deeds, most debtors are unaware that they exist.
In a Chapter 7 bankruptcy, however, an option exists under Section 522(f) of the bankruptcy code to file a motion to avoid the judicial lien. Filing the motion involves an analysis of whether that lien "impairs" the exemption on your home. In simpler terms, if the mortgage and any other senior liens on the property total more than the value of the house, the judicial lien secured against the property "impairs an exemption to which the debtor would be entitled" as the language of 522(f) goes.
It is important to see if you have a lien that can be avoided against your property because the holder of the lien, when the house is later sold, can attempt to pursue proceeds for that lien in the sale. Thus, simply discussing this ahead of time with your experienced bankruptcy attorney and subsequently filing the appropriate motion during your active bankruptcy can save many headaches down the road.
