A major source of confusion among people who file for bankruptcy is whether debts on which there is a judgment or lien can be removed (discharged) in a bankruptcy case.

Whether a debt is dischargeable or not depends on the type of debt it is, and how it was incurred. For example, debts incurred through fraud are not dischargeable. Neither are certain tax debts or student loans.

It is important to understand that a judgment and a lien are not the same thing. A judgment is a court order either fixing liability and an amount owed, or ordering someone to do something. A lien is the creation of a security interest against an asset or assets, giving the judgment creditor rights against that asset (such as real estate, or a bank account, or wage garnishment). How much of a right to collect depends on the equity in the asset and if any senior creditors (such as a mortgage holder on real estate) are present.

A judgment lien is not automatic. First, the creditor must obtain a judgment from the court. Then, to create a lien, it must be perfected under applicable non-bankruptcy law (usually the State or county in which the asset is located). For real estate, this usually involves obtaining a certified abstract of the judgment from the court that issued it, and recording it with the county recorder's office wherever the property is located that the creditor wants the lien to attach.

So, can one get rid of (avoid) a judgment lien in a bankruptcy case? If certain requirements are met, yes. The bankruptcy code section that states this is 11 U.S.C. 522(f), which allows a lien to be removed to the extent that it impairs an exemption to which the debtor would have been entitled in the absence of the lien. This is basically a mathematical calculation, and depends of course on the value of the asset, the amount of any senior liens, and the amount of the available exemptions (usually governed by the laws of the State where the bankruptcy case is filed, but not always).

The bottom line is that if you have a creditor who has obtained a judgment lien against you, be sure to tell your bankruptcy attorney so he/she can assess whether or not it can be removable in your case. This can also be done after your bankruptcy case is over, but there are limits and it requires additional legal fees to reopen your bankruptcy case.