The Short Answer
A Motion to Avoid a Judicial Lien is a request filed with the bankruptcy court to remove a judgment creditor's lien from your home. When a creditor wins a lawsuit against you in North Carolina, they automatically get a lien on any real property you own in that county — meaning you can't sell your house without paying them first. Filing bankruptcy can eliminate the underlying debt, but without this motion, the lien can survive. If the court grants it, the lien is stripped from your property and you walk away free and clear of that creditor's claim against your home.
You may be considering filing bankruptcy because one of your creditors has obtained a judgment against you. Most people are uncertain of the consequences that a judgment can have. Usually, if you do not own any real property (house or land) or if you do not have any equity in your property, it can be difficult for the judgment creditor to satisfy the judgment. In other words, if you do not own any property with value, it can be difficult for the creditor to receive money or property from you to pay off the judgment.
On the other hand, you may need to be concerned about a judicial lien. If you own real property in the same county where the judgment was entered by the court, then the creditor automatically has a lien against your real property. This means that when you try to sell your house, you will have to pay off the judgment before you can sell the house.
To better explain how a judgment lien works, here is a common situation:
You owe $25,000.00 on a credit card and have fallen behind on the payments. You first receive a Civil Summons from the attorney representing the credit card company. They give you 30 days respond, and when no response is received from you, the credit card company obtains a Judgment from the court. The lawsuit was filed in Guilford County, which is where your home is located. Ten years later, you try to sell your home. You are unable to do so without first paying off the $25,000.00 judgment (plus interest and attorney fees).
The good news is that bankruptcy can essentially eliminate the judgment lien on your home. If you own a home and a creditor has obtained a judgment against you, ask your bankruptcy attorney about filing a Motion to Avoid a Judicial Lien. In the appropriate situations, your attorney can file a motion with the bankruptcy court requesting that the judicial lien be removed from your home upon completion of your bankruptcy. If the bankruptcy court grants the motion, then the judgment creditor will no longer have a lien on your house. You also need to ensure that the judgment debt is listed on your actual bankruptcy petition in order for the debt to be eliminated.
Although your bankruptcy attorney will charge an additional fee to file the Motion to Avoid a Judicial Lien, it is well worth the attorney fee to eliminate thousands of dollars in additional liens on your home. Also, these fees are usually set or governed by the Bankruptcy Court.
If you are one of our clients and need to have a Motion to Avoid a Judicial Lien filed then it is your ultimate responsibility to reach out to us and make sure the appropriate motion is filed and the lien is removed before the close of your bankruptcy.
Key Takeaways
- A judgment entered against you in North Carolina automatically becomes a lien on any real property you own in the same county where the judgment was filed.
- Even if bankruptcy discharges the debt itself, the judicial lien on your home can survive unless your attorney separately files a Motion to Avoid a Judicial Lien.
- The judgment debt must also be listed on your bankruptcy petition for the underlying debt to be eliminated along with the lien.
- Your bankruptcy attorney will typically charge an additional fee for this motion, but it is usually set by the Bankruptcy Court and can save you thousands of dollars when you sell or refinance your home.
- If you are already in a bankruptcy case, it is your responsibility to contact your attorney to confirm the motion has been filed before your case closes — a closed case without the motion means the lien stays.
Attorney Insight
The mistake I see most often is clients finishing their bankruptcy feeling relieved — debt discharged, case closed — only to discover years later when they go to sell their home that a judgment lien is still attached to the property. Discharging the debt and removing the lien are two separate steps, and if the motion isn't filed before the case closes, we generally can't go back and fix it. In North Carolina, where a judgment attaches to real property county by county the moment it's entered, this catches a lot of homeowners off guard. If you own a home and a creditor has sued you, bring it up at your very first meeting with us — don't assume it's already being handled.
