However, because New Jersey has a statute that provides for discharging or cancelling a judgment following a one (1) year period after a bankruptcy discharge is entered, in many instances it is advisable for debtors to wait a year and apply to discharge the judgment in the original New Jersey Superior Court judgment case. A New Jersey docketed judgment remains in the judgment index for 20 years, and can be renewed by a creditor’s timely application.Ī procedure exists in bankruptcy court to remove a judgment lien against a debtor’s real estate pursuant to 11 U.S.C. At that point, that judgment becomes a statewide lien on any real estate owned by the debtor in New Jersey. This is because, in New Jersey, once a creditor obtains a judgment, it may docket its judgment on the index maintained by the Clerk of the Superior Court of New Jersey in Trenton, New Jersey. So while a bankruptcy discharge prevents a creditor from attempting to collect its debt against a debtor directly, a creditor’s docketed judgment lien remains secured against a debtor’s New Jersey real estate. In short, property is not “washed” of liens simply by passing through bankruptcy. So if certain liens or encumbrances are secured by a debtor’s property at the time they file a bankruptcy petition, and no affirmative action is taken to remove those liens or encumbrances during the course of the bankruptcy proceeding, the liens and encumbrances will still exist at the time the case is concluded. This is because the bankruptcy proceeding, in and of itself, does not affect the nature and quality of the title to the debtor’s real estate. A bankruptcy discharge serves merely to discharge a debtor’s obligation to pay the debt which the judgment or other lien secures it does not affect the lien itself. This is because Bankruptcy Court discharge orders do not, without further action, remove judgment liens from debtors’ real property.īy way of background, it is a well-settled principle of law that liens may survive a bankruptcy discharge. It is common, however, that these creditors’ judgments still appear as liens against debtors’ real property in New Jersey long after their bankruptcy case has concluded. This includes a discharge of debts held by creditors who obtained court judgments, such as from the Superior Court of New Jersey. A successful bankruptcy case generally results in the entry of a discharge order by a Bankruptcy Court eliminating a debtor’s liability on many debts.
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