Execution liens on your home are like judgment liens, “avoidable” in bankruptcy. But only if the underlying debt can be discharged.
The last three blog posts have been about judgment liens on your home. We explained the trouble they cause, how bankruptcy can often get rid of them, and gave examples of both. Today we mention a couple of important twists to round out this topic of judgment liens.
Judgment Liens and Execution Liens
We’ve talked about getting rid of judgment liens without saying anything about execution liens.
“Execution lien” is a less commonly heard term. It’s used more often in certain states.
An execution lien usually arises when a creditor sues you, gets a judgment (usually because you don’t respond to the summons), then the creditor gets a writ of execution in order to collect on the judgment, and finally records the execution wherever your deed is recorded.
The details of this procedure vary from state to state. For example, in some states the entry of the judgment itself creates a lien on real estate in that county. In other states this depends on the court in which the judgment was obtained, sometimes requiring a separate docketing of the judgment in the land records. Or sometimes the creditor needs a recorded writ of execution after getting a judgment, in order to get a lien on your home.
Execution Liens are “Judicial Liens”
Simply put, whether a lien placed on your home is called a judgment lien or an execution lien likely does not matter for purposes of getting out from that lien in bankruptcy.
We have been using the term “judgment lien.” But the actual broader term used in the Bankruptcy Code is “judicial lien.” The U.S. Bankruptcy Code says that “the debtor may avoid [that is, undo] the fixing of a lien… if such lien is—a judicial lien.” Section 522(f)(1)(A).
A “judicial lien” is a “lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.” Section 101(36) of the Bankruptcy Code. That broad language makes quite clear that it doesn’t matter whether you are dealing with something called a judgment lien or execution lien. Either one is a judicial lien which can potentially be “avoided” from the title of your home.
See our post of last Friday about how that’s done.
Judicial Liens on Non-Dischargeable Debts
In that same recent blog post, we gave a list of conditions for “avoiding” a judgment/ judicial lien. But we didn’t specifically list one crucial condition because we figured it was self-explanatory. However we realize this needs to be made clearer.
That one additional condition is that the debt which is the basis for the judgment against you must be a debt that can be discharged—written off—in bankruptcy. If you can’t discharge the underlying debt that led to the judgment, you can’t “avoid” the judicial lien resulting from it.
Take the example of a debt for a criminal restitution. A court orders somebody to pay $30,000 in restitution because of his or her embezzlement. The court would enter a criminal judgment including that restitution amount. That judgment would become a judgment lien on that defendant’s real estate. Criminal restitution can never be discharged in bankruptcy. Because this debt underlying this judgment lien can’t be discharged, the resulting judgment lien cannot be “avoided” in bankruptcy.
This could be the topic of many blog posts. But in general there are two categories of debts that are not discharged—written off—in bankruptcy. Because the underlying debt is not discharged, the resulting judgment lien on real estate cannot be “avoided”—removed.
First, certain debts are automatically not discharged. They include the following:
- many but not all student loans
- child support or spousal support obligations
- divorce property settlements (except under Chapter 13)
- criminal fines, costs, and restitution
- some but not all income taxes and other taxes and governmental debts
- many but not all homeowner association fees and assessments
- death or injury caused by driving under the influence of intoxicants
Second, there are other kinds of debts that may not be discharged, but only if the creditor files an objection. It’s not automatic. In fact, if the creditor does not object to a discharge, these kinds of debts ARE discharged in bankruptcy. The creditor must file a formal objection in bankruptcy court, do so within quite a short timetable, and then the court decides whether that the particular debt meets certain conditions. The kinds of debt that MAY not be dischargeable include the following:
- injury to person or property caused by a willful and malicious act, such as an assault
- fraud used to get money, goods or services, such as by lying on a credit application or bouncing a check
- fraud committed while acting as a fiduciary, such as by embezzlement or theft while being an executor, trustee or guardian
If the judgment does not relate to these categories, and the creditor doesn’t successfully object to discharge, then in bankruptcy you can discharge the debt underlying the judgment. If the underlying debt can be discharged, then the resulting judgment lien could also be “avoided”—permanently removed—from your home’s title.