A judgment lien can be a serious financial burden—blocking property sales, draining bank accounts, and restricting financial freedom.
But what happens when a debtor files for bankruptcy?
- Can bankruptcy eliminate a judgment lien?
- Does it depend on the type of bankruptcy?
- What property is protected?
Let’s break it all down.
1. What Happens to a Judgment Lien in Bankruptcy?
Filing for bankruptcy can:
- Stop collection efforts immediately (thanks to the automatic stay)
- Discharge (erase) the debt if eligible
- Potentially remove the judgment lien from property
Example:
A debtor has a $25,000 judgment lien against their home.
They file for Chapter 7 bankruptcy and claim their homestead exemption.
The court removes the lien, and the debtor keeps their home.
Bankruptcy doesn’t just eliminate the debt—it can wipe out the lien too!
2. Does the Type of Bankruptcy Matter?
Yes! Judgment liens are handled differently in Chapter 7 vs. Chapter 13 bankruptcy.
| Chapter 7 (Liquidation) | Can fully discharge certain debts & remove judgment liens if the property is exempt | Best for those with little income & high debt |
| Chapter 13 (Repayment Plan) | Reduces or removes the lien as part of a structured payment plan | Best for those with steady income who want to keep assets |
Example:
A debtor owes $50,000 in judgment liens but qualifies for Chapter 7.
The court eliminates the lien, and they walk away debt-free.
The right type of bankruptcy can clear the lien completely.
3. Can Bankruptcy Remove the Lien Entirely? (Lien Avoidance Rule)
Yes—but only under specific conditions.
A debtor can file a motion for Lien Avoidance if:
- The lien is on exempt property (like a primary home covered under Arizona’s $400,000 homestead exemption)
- The lien prevents them from keeping that exempt property
- The lien is for a dischargeable debt in bankruptcy
Example:
A debtor has $300,000 in home equity and a $20,000 judgment lien.
Because the equity is within Arizona’s homestead exemption, they file a motion to remove the lien.
The court grants the motion, and the lien is erased.
"Lien Avoidance" = Judgment lien disappears!
4. What Happens to Non-Exempt Property?
Bankruptcy can wipe out a judgment lien, depending on the case.
How It Works:
- Chapter 7 Bankruptcy – Can eliminate judgment liens if they affect exempt property (like a primary home).
- Chapter 13 Bankruptcy – Can restructure debt and remove liens after payments.
Example:
A debtor with $50,000 in judgment liens files for Chapter 7 bankruptcy.
The court discharges the debt and removes the lien from their homestead.
Bankruptcy should be a last resort, but it can clear liens permanently.
5. What If the Judgment Lien Is for Non-Dischargeable Debt?
Some debts CANNOT be erased in bankruptcy—even if there’s a judgment lien.
Non-Dischargeable Debts Include:
- Child support & spousal support
- Most student loans
- Criminal fines or restitution
- Certain tax debts
Example:
A debtor has a $30,000 judgment lien for unpaid child support.
Even after filing bankruptcy, the lien remains.
Bankruptcy won’t erase obligations for child support, taxes, or criminal fines.
What Happens to a Judgment Lien in Bankruptcy?
| Debt is fully dischargeable (credit card, medical, personal loans, etc.) | Lien can be removed if attached to an exempt asset |
| Debtor files Chapter 7 bankruptcy | Lien is removed if it interferes with exempt property |
| Debtor files Chapter 13 bankruptcy | Lien may be reduced or included in a repayment plan |
| Lien is on non-exempt property | May remain even after bankruptcy |
| Lien is for child support, taxes, or fines | Not removed—still enforceable |
Final Thoughts: Should You Remove a Judgment Lien Early?
✅ Yes, if:
- The debt is dischargeable (credit cards, medical bills, etc.).
- The lien is on an exempt property (like a primary home with protected equity).
- The debtor files for Chapter 7 and requests lien avoidance.
❌ No, if:
- The lien is for child support, taxes, or criminal restitution.
- The lien is attached to non-exempt assets (luxury property, investment homes, etc.).
- The debtor doesn’t request lien avoidance.
Bankruptcy can be a powerful tool to remove judgment liens—but only if done correctly.
Considering bankruptcy? Make sure you understand how it impacts your judgment liens before filing!
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