Definition of a Judicial Lien

• A judicial lien is not quite the same as a judgment. It begins with a judgment and is the second phase of a two-step legal process a creditor must take in order to try to get payment. A judgment is a court order confirming that you owe the debt. In Colorado, the creditor then must file and record a copy of the judgment with the county clerk. This turns it into a judicial lien against your property.
  
  

Removing a Lien

• If a creditor gets a judgment against you prior to you filing for bankruptcy, but does not record that judgment with the county before you file, it can't do it afterward. Your automatic bankruptcy stay prevents creditors from doing anything to try to collect the money you owe them. If your creditor does get the lien before you file, you must address it as a separate part of your bankruptcy proceeding. You must file a "motion to avoid judgment lien," asking the bankruptcy judge to remove it. If you don't do this during your bankruptcy process, you'll have to go back to court, reopen your bankruptcy, and file the motion to get the lien removed. You're entitled to have it removed, but you must specifically ask for it. It's not automatic.
  
  

Repercussions

• If you don't get the lien removed, it remains against your property. If you never sell your home, it will do you no harm. The creditor can't collect on it unless you try to sell. In that event, you would have to pay the creditor the amount of the lien in order to clear title to your property and sell it, even though your bankruptcy discharged the original debt.
  
  

Warning

• A Chapter 7 proceeding allows you to take certain exemptions or property that is safe from sale by your trustee in order to pay as many of your debts as possible. Colorado's homestead exemption is $60,000. It protects $60,000 of the equity you might have in your real estate. If you have more equity than that, the trustee can force the sale of the property in your bankruptcy proceeding to pay off the mortgage and distribute any funds left over to your other creditors. If you keep your home and if the property appreciates between the time the court discharges your bankruptcy and when you sell your home, only $60,000 toward the lien remains protected by the exemption, even if you get the lien removed. If the lien is for $65,000, you would still have to pay the creditor $5,000 to clear title.