Bankruptcy is intended to provide a fresh financial start. However, if your bankruptcy attorney is not diligent, your financial past could come back to haunt you. If you own a home and a creditor has gotten judgment against you, it’s very likely that it has filed a transcript of judgment with your county clerk and recorder’s office. Doing so places a judgment lien on your property, which means that before you sell your property, you will have to settle with that creditor to release the lien and pass on clear title to your buyer.
Bankruptcy will eliminate the debt that you owe to a creditor, but it will not automatically remove any judgment lien a creditor has filed. In order to remove the judgment lien, your bankruptcy attorney must file a Motion to Avoid Judgment Lien, which is allowed by Bankruptcy Code Section 522(f). Of course, your attorney must know about such a lien in the first place and should ask whether or not any exist. If there is any question of there being such a lien, you should run a title report.
Section 522(f) of the Bankruptcy Code provides:
(1) Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is— (A) a judicial lien, other than a judicial lien that secures a debt of a kind that is specified in section 523(a)(5)
As indicated by the section, you can only avoid the lien to the extent impair an exemption. In Colorado, the homestead exemption is $60,000. So, if the judgment lien is for $75,000, you will only be able to avoid $60,000 of the judgment lien, leaving a remaining lien of $15,000, which will have to be settled when you sell your home.
Avoiding judgment liens is just one of the more complex aspects of personal bankruptcy. You should consider consulting with a Colorado bankruptcy attorney to understand more about your rights and obligations in bankruptcy.