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Help! Judgment lien after 5 yrs -- is it too late for bankruptcy?


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A default judgment was recorded against me in 2004 as well as liens against any property. I had no real estate or personal property at the clerk's office. I had been driving a car owned by my parent for the last 5 years. Last month I purchased a car (no financing) valued at $7,000 and registered it in my name and my wife's name. I got the Certificate of Registration today and on it is "Lien 1 Pending." I have not received the title yet.

I'm in Kentucky and the maximum value for exemption on a vehichle is $2,500. Does this mean my judgment creditor can (or will) come after our car right away? Would it be wise to file bankruptcy at this time, or is it too late for that? I owe the judgment creditor around $40,000. My wife and I are disabled and our incomes are small and fixed. We can't afford to lose this car.

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Admin-

Can you be specific as to why the judgment creditor won't come after the car? Its quite common. The sheriff showed up at my brother's door in November and levied his vehicle 90 days after being sued for a mere $3100. He was forced to turn the car over (along with the long list of personal assets including a television, etc.) so he filed bankruptcy to protect himself. I would think this would be no different unless the OP's state law is explicit.

The general rule is that joint property can be reached by a creditor of either of the holders of that property (except for real estate titled as "tenants-by-the-entirety" by husband & wife). The car would be a perfect asset for them to easily seize.

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Admin-

Can you be specific as to why the judgment creditor won't come after the car? Its quite common. The sheriff showed up at my brother's door in November and levied his vehicle 90 days after being sued for a mere $3100. He was forced to turn the car over (along with the long list of personal assets including a television, etc.) so he filed bankruptcy to protect himself. I would think this would be no different unless the OP's state law is explicit.

Wow, what state was that in? In most states I have read about, your BK exemptions are also applied to judgement exemptions. Sometimes you may need to file a "claim of exemption" with the courts, but for a sheriff to have went in a person's house and take a tv, the judgement creditor would have already won judgement and the debtor would have already been to court for a "debtor's exam" and exemptions would have been sorted out.

Here in SC, you're allowed $50,000 home equity exemption, $5000 auto, $4000 clothing and furniture misc, and also a $5000 wildcard exemption that you can use to add to the other previous exemptions I just mentioned in case you have an auto or something else worth more than $5000.

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Oh, to answer the OP, the lien can be wiped out by a BK. If I were you and this is the only lien, just try to wait it out and see if they try to come after it. You may be able to claim exemption from your state's statutes. And they cant just show up and take it. Lets say you have a $2500 auto exemption, then they would have to pay you $2500, or whatever the amount of the exemption, before they could even seize it.

Filing BK is up to you, but you may be able to just wait out the lien. That could be from 10 to 20 years. So drive the car for as long as possible and then just see what happens. If you file BK, unless you learn to do it on your own, theres the $$ it costs for the BK lawyer, plus if you have other assets over your state's exemption amounts, the bk trustee could seize those to pay towards the judgement. The longer you wait, the more the auto's value goes down, so time is on your side if you need it.

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Pennsylvania. In PA, there are NO exemptions for vehicles. None. Its $300 cash, a bible, tools of the trade, and a sewing machine.

I think the previous poster has it backwards. Your state exemptions apply in bankruptcy (if you can't choose the general federal exemptions), not the other way around. Fortunately for Chap 7 filers, PA allows a filer to choose the federal exemptions- thus allowing for a vehicle, homestead, wildcard, and other exemptions. But BK is a whole other animal. The OP is concerned about exemptions from execution of judgment.

So depending on state, you can have $0 in protected equity or more than the OP's car is worth ($7000). If its $0, any judgment creditor would be a fool not to immediately levy on an otherwise unencumbered vehicle.

Edited to add that they don't pay you your exemption amount first. They sell the car and then pay off the creditor/debtor. So the car would go and then you'd get your $2500. You have to go in front of a judge and claim your exemption.

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Here is a typical notice you'll recieve when property is seized. It is on the party being levied on to claim exemptions and exceptions.

http://www3.state.id.us/idstat/080050007C.K

Excerpt:

"If you believe the money or personal property that are being levied upon is exempt, you should immediately file a claim of exemption. If you fail to make a timely claim of exemption, the sheriff will release money to the plaintiff, or the property may be sold at an execution sale, perhaps at a price substantially below its value, and you may have to bring further court action to recover the money and property."

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Well, i dont have it backwards for SC. It clearly states that bk exemptions also apply to judgement exemptions.

As far as PA, what if a person can show undue hardship on anything seized, like they need a vehicle to get to work and doctors visits, then what judge would allow the car to be seized first and then the exemption paid? They need an auto. PA is definitely a different state from some others Ive read about.

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There is no state bankruptcy Code. Its entirely federal, and the federal BK code "plugs in" state exemptions.

What you may be referring to is the way some states have bifurcated non-BK debtor exemptions v. BK exemption schedules. The federal Code is silent on this but essentially this is questionable practice and my guess is that this issue WILL ultimately make its way to the Supreme Court since this is a backdoor way for states to circumvent federal preemption.

What I think your state is saying is that they don't make a distinction between bk and non-bk exemptions.

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