At that point, creditors may not legally take any action on a judgment entered against a debtor and may not take any action to collect upon that debt. A judgment is a court order issued in response to a creditor’s lawsuit against a debtor. A judgment declares the debtor liable for money owed to the creditor. A creditor with a judgment against a debtor may enforce that judgment by garnishing up to 25% of a debtor’s wages, or even take money directly from the debtor’s bank account. A judgment entered in the county in which the debtor has real property (land or a house) automatically creates a lien against that property. The judgment creditor can also attach that judgment as a lien against property the debtor owns in other counties or even other states. This means the creditor can force the debtor as a homeowner, to pay off the lien before the debtor can sell their property.
Judgment liens may be removed in a Chapter 7 and in a Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, after a debtor receives their bankruptcy discharge in approximately 3-4 months after their case is filed, the debtor may remove a judgment by filing an application with the Minnesota state court, requesting that the lien be removed, as the debt is no longer enforceable due to the debtor’s discharge in bankruptcy. The same is true with a Chapter 13 bankruptcy discharge. However, in some cases, the debtor may want a judgment lien against their house removed before the end of their 3-5 year Chapter 13 plan, in order to sell or refinance the property. A debtor may do this by filing a motion with the court, asking the bankruptcy court to enter an order, removing the judgment liens. The court will grant the motion and remove the judgment liens if the debtor can show that the judgment liens impair the debtor’s ability to exempt the equity in their homestead – which is most often the case.
In summary, a debtor’s civil judgments may be removed in both Chapter 7 and Chapter 13 bankruptcies. To learn more about the process of removing a judgment after filing for bankruptcy, come see us at our new office in St. Paul, Minnesota, or come visit us at LifeBackLaw.com!