I always advise people not to put off the filing of a bankruptcy if that is the best step for them. This is because their situation could get worse if they wait too long (bank levies, wage garnishments, etc.). Even if a creditor does not levy or garnish anything, the mere entry of a judgment can cause problems if you are a homeowner. It requires them to take a couple extra steps in their case
NJ Judgments Can Be Real Estate Liens
Once a creditor enters a judgment here in New Jersey, it can then take the additional step to record it as a real estate lien with the Judgment Unit in Trenton. Whenever real estate changes hands, a title company will do a search by name of the records at that unit, and it you're name comes up, that can be a problem at closing.
If the judgment is for something like a credit card, medical debt, or car repo deficiency, then the debt itself can still be discharged (wiped out). But that doesn't mean the lien goes away. That's where the extra step comes in.
What Extra Steps Must You Take?
So what are those extra steps? Well, there are ways under the bankruptcy code and New Jersey law to deal with the lien, but you should bear in mind that the "avoiding" of that lien requires an extra step in your bankruptcy for which many attorneys charge an extra fee. Thus waiting until a judgment is entered could end up costing you more money to file.
You Could Remove the Judgment Lien
People in bankruptcy are allowed to keep assets that do not have a net value over and above a fixed amount called an "exemption." Therefore, if the judgment lien is "sitting" on that equity, it "impairs" your ability to enjoy the benefit of that exemption. This means that if you do not have any more equity in your house than you can legitimately exempt, you can "avoid" the judgment lien.
The problem comes in if you have more equity in your home than you can exempt, the judgment lien may stay in place. The other option is to wait until a year after the bankruptcy is over and make a motion in state court to remove the judgment as discharged in bankruptcy. This can be a problem if you want to sell the property during that 12-month period.
You Could Claim the Lien is a "Preference."
Another angle of attack on the judgment lien is if you file bankruptcy within ninety (90) days of the date the judgment was entered. One reason people file bankruptcy is to prevent any one creditor from gaining an advantage (such as filing the first wage execution, bank levy or, in this case, judgment lien).
A fundamental principal of bankruptcy law is to treat creditors of the same class equally, and by obtaining a judgment lien ahead of other unsecured creditors, the judgment creditor has obtained an advantage.
This amounts to a "preference" under the bankruptcy code, and can be the basis of an objection. But again, that is an additional step that you will need to take, which could end up costing you extra.
So What Do I Do?
If you live in Burlington, Camden, Gloucester, Salem or Cumberland County, your debt is beyond your ability to handle to the point where your creditors are starting to sue you, and you are considering filing bankruptcy, then don't wait another minute! Things could get worse! Call me immediately at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.
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