Once you file for bankruptcy protection, the bankruptcy laws bar creditors from taking any further attempts to collect from you. This means that even if you have been sued, the creditor cannot seek a judgment or make you participate in that lawsuit without getting permission from the bankruptcy court.
If, on the other hand, you wait to file bankruptcy until after a judgment has been entered against you, a judgment lien may automatically attaches to any real estate that you may own in the county in which the judgment was either entered or transcribed. In a very real sense, the judgment converts a once unsecured debt into a secured one.
Much of the time, however, judgment liens can be avoided because they “impair” a debtor’s allowed exemptions. Provided that you do not have any more equity in your house than you can legitimately exempt(roughly $50,000 in Oregon and more than twice that amount in Washington), you can often “avoid” the judgment lien under the Bankruptcy Code. Given that few people in Portland, Vancouver or Salem have more home equity than the their allowable exemption, voiding a judgment lien should not present a great problem. Still it is far simpler, less risky and less expensive to get the case filed prior to the final judgment stage.
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