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Bankruptcy and Judgement Liens
One of the most commonly misunderstood facts about bankruptcy is the effect of discharge upon judgement liens.Common scenario:
Your seller has an abstract of judgement recorded against him, he has recorded a homestead and filed a petition for bankruptcy. The seller has listed the judgement lien creditor in the bankruptcy and an order has been entered discharging the seller from his debts.
Immediately it is believed that the debt was discharged in the bankruptcy. A debtors discharge in bankruptcy eliminates the debtors personal liability for the judgement. This means the creditor can’t pursue collection from the debtor, personally, provided the judgement is a dischargeable debt, but it does not extinguish the judgement lien from the property and can be enforced by execution sale.
Under the bankruptcy code, one course of action that may be taken in order to remove the lien from said property is for the debtor to petition the court for an order “avoiding the judgement lien”. If said order is granted, the judgement lien is avoided and the property on which the lien attached cannot be sold at execution sale in an enforcement of the judgement.