The legal term “lien” refers to the right to maintain possession of a property that belongs to someone else, until that person has paid off a debt that they owe. Liens are a type of security interest placed on an item or property in order to secure a debt or a loan, most commonly a home or automobile loan. In specific circumstances, a lender may take a lien and sell it when the borrower is unable to make their scheduled payments.
Liens are typically a formal document signed by the creditor, to whom money is owed, or the debtor, who is agreeing to make all due payments. A lien is intended to provide security to the person taking out a loan to cover their debt and obligations. For the creditor, a lien provides some extra leverage against the debtor in order to ensure that payments are made on the loan.
Depending on the specifics of a situation, there are different types of liens that may be obtained. Liens generally result from a contractual agreement between the creditor and the debtor. Before a lien may be placed on the property, the creditor will need to go to court and present evidence of the unpaid debt. A judicial lien is typically obtained in connection with the final judgment issued in a lawsuit between the debtor and creditor. Once the judicial lien is certified by the court, the debtor is required to forfeit their property which may then be subject to a judicial sale.
Can a Judicial Lien Be Avoided?
The most obvious way to avoid any sort of lien is to make all payments on time. However, in some cases, a judicial lien can be avoided through additional steps taken by the debtor. Such a process relieves the debtor of any lien obligations imposed against their property. However, this process can become complicated due to the fact that it often overlaps with other issues, including homestead exemptions.
In most jurisdictions, judicial lien avoidance can only be obtained in connection with bankruptcy proceedings. These proceedings are either a Chapter 7 or a Chapter 13. Filing for a Chapter 7 bankruptcy often allows a person’s debts to be discharged, or forgiven. Lien avoidance would allow the lien to be “lifted” from the property so that the debtor retains possession of their property. In order to have a judicial lien discharged, the debtor filing for bankruptcy must also file a “Motion to Avoid Judicial Lien” when filing their bankruptcy papers. The eligibility criteria for the process will likely vary regionally.
Should the debtor fail to file the motion when filing for bankruptcy, the lien is said to have survived the bankruptcy hearing and will remain attached to the property once the proceedings have completed. If the debtor is successful in their attempts, the court will grant an Order Avoiding Judicial Lien which will remove the lien either completely or partially.
Can a Judicial Lien Be Removed?
It is important to remove a lien once a debt has been fully satisfied because a clear title is required before selling or refinancing a home. In addition to the previously discussed methods of lien removal, a debtor may also consider the following options:
- Obtain a Court Order: If the lien was obtained through fraud, coercion, bad faith, or any other improper means, the debtor may ask the judge to remove the lien. This may be hard to prove, and will require clear proof of improper behavior;
- Privately Negotiate: It may be possible for the debtor to negotiate with the creditor to work out a settlement agreement to remove the lien. If both parties agree, this may be done through arbitration, mediation, or informal negotiations; or
- Statute of Limitations: The debtor may decide to let the statute of limitations on the lien run out, as opposed to taking any action. Each state has its own law setting the limitations on how long a lien is valid, as well as how long a creditor may file suit once the debtor defaults.
Generally, it is possible for the creditor to file an objection to a motion to avoid judicial liens. There are filing deadlines associated with such objections, and if the creditor does not respond in the proper time frame, they may lose their right to object to the motion. The most common ground for disputing a motion involves the valuation of the real estate. An example of this would be if there is some dispute over the property’s true value which could affect the debtor’s ability to avoid the judicial lien.
Do I Need an Attorney for Judicial Lien Laws?
Liens and the lien removal process generally involve complex determinations and a working knowledge of individual state laws. As such, you should consult with a skilled and knowledgeable real estate attorney if a judicial lien is being placed on your property. An experienced attorney can help you understand your rights and options, as well as represent you in court as needed.