Is a Judicial Lien an Unsecured Debt?

You don't have to consent to have a judgment lien awarded against you -- quite the opposite. With judgment lien in hand, a creditor can record a claim against your house or garnish your wages. It can even withdraw money directly from your checking and savings accounts. Creditors aren't limited to one avenue of collection, either. A single judgment creditor might record a lien against your real estate while going after your bank accounts and tapping into your pay. The longer you go without paying the lien, the more interest it accumulates. Once you pay up, the creditor must release the lien.

Judgment liens can attach to both real estate and personal property. For creditors, attaching liens to big ticket personal property items like business equipment can be an effective way of pressuring debtors to pay. If the debtor ever wishes to sell the attached machinery, he must first pay off the lien. Real estate liens can stop a sale dead in its tracks. If a prospective buyer learns that your home has liens attached to it, the deal could fall apart before it even gets off the ground. All liens must be paid before property can transfer, which decreases the money you receive from the sale.

Secured debts, like mortgages and car loans, are backed by property that can be taken back if the debtor fails to pay. Unsecured debts, such as credit cards, don't come with that guarantee. While judgment liens are secured by property, they're usually so-called junior liens that rank lower on the priority list than other secured debts. If a debtor wishes to foreclose on a house to get at its money, it must get in line behind older liens like mortgages, home equity loans and judgment liens created before it came along. If those liens take up all the debtor's money, the junior lienholder is simply out of luck.

Just because a debt is discharged in bankruptcy doesn't mean its liens disappear. If you are considering filing a Chapter 7, it may be possible to remove a judgment lien from your property. Sometimes called lien avoidance or lien stripping, you must meet certain criteria before you can ask for the lien to be removed. For the avoidance to be successful, the property must qualify for an exemption that removes it from your pool of assets. If selling the property would destroy your exemption, it's possible you will be able to avoid the lien.