A Chapter 7, 11 or 13 Debtor may avoid a judicial lien recorded against their real property that impairs the exemption on the property. There is no statute of limitations on filing a motion to avoid this judicial lien. Thus in at least one case the lien was removed after the bankruptcy case had already closed.
In the Central District of California, the judicial lien is removed by filing a motion. The Bankruptcy Court has a form that requires the identification of the exemption and the judicial lien. It generally requires an appraisal be done to show that the value of the property is less than the voluntary liens and the exemption.
So, for example if a house is appraised at $400,000 and there is a first mortgage for $350,000, and a judicial lien of $35,000 the judicial lien can be removed. The debtor may claim a homestead exemption for $75,000 (for an individual) or $100,000 (for a family unit). In some instances $175,000 can be claimed. So, taking the example the $350,000 and the $75,000 exceeds the $400,000 value of the house. So the judicial lien is avoided and removed from the house.
The only way a creditor can prevail on such a motion is to challenge the exemption or challenge the appraisal. Both are very hard to do.
If you have questions about avoiding a judicial lien or any other bankruptcy question, please call Christopher P. Walker at 714-639-1990.