When creditors successfully sue you in court for money you owe, the judgments that result can wreak havoc on your financial life. Judgments can be used to garnish your wages and bank accounts, or to place liens against your assets. The good news is that when your bankruptcy is discharged, judgments against you are automatically removed from your credit report. However, if the creditor placed a lien against your property before you filed for bankruptcy, the situation becomes a bit more complicated.
An automatic freeze went into effect on the date you filed your bankruptcy petition, prohibiting creditors from using judgments to try to collect from you. But if the creditor already used the judgment to place a lien against your property, you have to take an extra step to remove it. You must petition the court to reopen your bankruptcy case, then file a motion asking the judge to avoid or remove the lien. Don’t worry that this will bring all your discharged debts back to life -- it won’t. Strict rules apply to avoiding liens so you might need the help of an attorney. You must establish that the lien infringes on the exempt value of the property. Exemptions are dollar amounts that you’re allowed to keep by excluding them from the bankruptcy proceedings.
Disputing Lingering Judgments
If the judgment itself still appears on your credit report after your discharge, provide a copy of your bankruptcy petition and the discharge to the credit reporting agencies. Make sure to include a copy of the schedule of your debts so there’s no question that the one underlying the judgment was discharged.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.