How Will a Judgment Affect My Real Property And What Can I Do About It?

As noted recently on these pages by Doug Jacobs, a California Bankruptcy Attorney, a judgment lien against your real property can be removed from the property if the lien impairs an exemption you claim in your bankruptcy.  In New York State, you can only remove a judgment lien against your personal residence.  Your attorney needs to file a motion pursuant to section 522(f) of the Bankruptcy Code.  Attached to the motion to set aside the lien you need to include certain documents including the deed and a copy of the judgment filed in the County Clerk’s office.  Something showing the value of the property and the amount of mortgage and other liens against the property are also helpful. 

If you do not own a residence when you file your bankruptcy, you cannot set aside the judgment in the County Clerk’s office.  This sometimes comes up as a problem if you purchase (or inherit) real property AFTER your bankruptcy.  In that situation, even though there is no actual lien against the newly acquired property, it may appear that there is to someone searching the Clerk’s office.  This is because they will see a judgment against you, and they will see that you own the property.  Without knowing about the intervening bankruptcy and the discharge of the debt that underlies the judgment, they could draw the conclusion that the judgment was in fact a lien against the property.

The problem often surfaces if there comes a time that you want to borrow against, or refinance the property.  We have had several lenders looking to refinance such a property who ultimately reject the loan because they don’t understand that there is, in fact, no lien against the property.