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A judgment lien is a court determination that an individual or an entity owes a sum certain, usually based upon a contract or agreement or other facts that create liability of one party to another. The judgment lien could arise one of three ways. It could arise as a result of a default based upon a Complaint filed in a Court served upon a person or entity and a lack of defending the case by filing a formal Answer or opposition according to court rules. Second a judgment could arise after a full trial on the merits of a claim after which a court determines that a defendant is liable for damages to the Plaintiff, the party who initiated the legal action. Third, a judgment or it could arise after a decision is rendered on formal legal motion called a Summary Judgment Motion when the court determines without a trial based having reviewed sworn affidavits and documentary evidence there are no material issues of fact or law in dispute that would prevent entry of a Judgment or court ruling that a defendant is liable for monetary damages.

What Assets Or Property Can A Judgment Lien In New Jersey Apply To?

A judgment lien will arise after recording a court Order determining liability in a fixed monetary amount and payment of a $35 fee with the judgment section of the New Jersey Superior Court. The judgment automatically becomes a lien on any real estate owned in New Jersey by a defendant. The lien itself can be pursued through an execution process to attempt collection of the debt from assets owned by a judgment defendant. Personal property subject to levy and execution includes wages, bank accounts, non-retirement investment accounts or any property or any collections or valuables of any type in the possession of the defendant or a third party in the State of New Jersey.

What Types Of Judgment Debts Are Dischargeable In New Jersey?

Judgment debts arising from a personal judgment that are normally dischargeable in New Jersey if based upon a contract or a breach of an agreement that results in liability of a defendant. There are many types of judgment debts that are not dischargeable. These include student loans, domestic support obligations, alimony and support, obligations under a property settlement agreement, and most federal and state taxes. There is also a category under the Bankruptcy Code for other types of non-dischargeable debts incurred as a result of embezzlement or larceny, fraud in a fiduciary capacity or willful and malicious injuries or a judgment bases on actual fraud. The fraud and willful malicious injury claims against the defendants or for fraud in a fiduciary capacity would have to result from an adversary proceeding filed in the Bankruptcy court seeking a determination a debt should not be discharged in a bankruptcy case.

Do Judgment Liens Expire In New Jersey?

Judgments recorded in New Jersey are valid liens for 20 years. Nonetheless, a creditor can seek an extension of the lien by filing a Motion in the six month period prior to the 20th anniversary of the date the lien was filed. It is rare for anyone to keep track of a 20-year time period and file a motion for continuation of the judgment lien.

What Happens To A Judgment Against Me If I File For Bankruptcy In New Jersey?

The most significant benefit when you file for bankruptcy when a judgment lien exists against you is the protection of the automatic stay under 11 USC 362 of the Bankruptcy Code effective on the filing date of the Bankruptcy case. The stay imposed prevents continuation of creditor collection efforts or enforcement of the judgment. The stay is applicable in any type of Bankruptcy filing under Chapter 7, Chapter 13, or Chapter 11. In a Chapter 13 case, the Plan will routinely include a provision that the lien will be avoided and removed after completion of Plan payments. In a Chapter 7 case, a lien can be avoided and removed from court records if it impairs an exemption asserted for equity in real estate.

Is It Better To File Bankruptcy Before Or After A Judgment?

In nearly all circumstances, the decision to file a bankruptcy case before a judgment is entered against a debtor is recommended. Among the strategic reasons, a debtor’s case filing will prevent judgment execution efforts against them on wages or a levy on their bank account or other assets. After entry of a judgment prior to case filing, the personal obligation to pay the lien can be discharged in a bankruptcy case but the lien itself remains of record. The judgment lien can be challenged either in the Bankruptcy case itself or 1 year after a case is closed under New Jersey statutes.

Is There Anything That Can Be Done To Eliminate The Judgment Lien During A Bankruptcy In New Jersey?

During a pending chapter 7 case, if a judgment lien impairs an exempt interest of the debtor in real estate, 11 USC 522 (f) of the Bankruptcy Code states that a lien that impairs an exemption can be avoided and removed. The formula applied to determine whether the lien impairs the debtor’s exemption on real estate requires a mathematical calculation. If adding together the amount of 1) the lien, 2) all the other liens on the property, and 3) the amount that the exemption the debtor could claim if there were no liens on the property and the total figure exceeds the value of the debtor’s interest in the property in the absence of all other liens, the judgment lien can be avoided.

In a chapter 13 case, the automatic stay prevents the judgment lien from being enforced during the bankruptcy. In a chapter 13 case, the debtor’s Plan must include a specific term that the judgment lien is sought to be avoided at the time when the Plan payments are completed. In chapter 13 case, a debtor is required to pay their excess disposable income as determined by means testing to payment of creditor’s claims. A plan confirmation Order will approve the amount of the monthly payment during the 3 or 5-year Plan. Once the Plan is completed, the debtor must file a Certification in support of a discharge of the judgment lien with the Bankruptcy Court to initiate the process to remove the lien of record. Once filed, a court order will then be entered by the court discharging the lien. Lastly, The Order as the final step in the cancellation process has to be filed in the New Jersey Superior Court Judgment Section

For more information on Judgment Liens Law in New Jersey, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (908) 373-8500 today.

Michael McLaughlin, Esq.

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(908) 373-8500

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