In Chapter 13 bankruptcy the debtor can wipe away part or all of some judicial liens. Judicial liens are liens placed on property by judgment creditors as opposed to purchase money liens which are placed on property by the vendor who sold you the property. A Chapter 13 debtor can wipe out judicial liens to the extent that the liens impair a property exemption to which the debtor is entitled under Florida law. That part of judicial liens not wiped off the property remains a reduced secured claim against the property.. A recent bankruptcy decision explored the property way to determine the amount of the remaining lien.
In this case, a debtor owned a truck fee and clear. A judgment creditor levied upon the otherwise unencumbered vehicle. The creditor’s lien was approximately $8,000. The truck value at time of filing was approximately $10,000, and the court found the debtor could apply to the truck a $6,000 property exemption. The court avoided the creditor’s judicial lien against the truck to the extent of the $6,000 exemption. The debtor claimed the remaining secured claim was $2,000 (the original lien amount less the exemption). The creditor claimed it retained a $4,000 secured claim (truck value less the exemption).
The court gave the creditor an secured claim for $4,000 representing the difference between the exemption and the current truck value, plus an unsecured claim for $2,000 representing the amount of the lien avoidance. In re: Mahendra Mootosammy, 07-6553
posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida