Creditors often turn over accounts that are past due to collection agencies for collection on the debt. Although a collection agency is a separate entity, it works on behalf of the creditor. If it appears as though the debtor is not going to voluntarily pay the debt, the creditor may file a lawsuit. In Kentucky, a creditor may be able to attach a lien on personal property prior to obtaining a judgment. A judgment is automatically attached after the creditor obtains it. Bankruptcy may temporarily protect the property from enforcement of the judgment.
Pre-Judgment Lien
Kentucky allows a creditor to attach a lien to real property prior to obtaining a judgment against the debtor under some circumstances. There must be an active lawsuit pending against the debtor, and the creditor must file a motion requesting the pre-judgment lien. The plaintiff, or creditor, must give the court a valid legal reason to attach the lien prior to judgment. Common reasons include an attempt to conceal or sell the property by the debtor, disappearance of the debtor or attempted removal or destruction of the property. The creditor is required to post a bond for a pre-judgment lien.
Post-Judgment Lien
Once a creditor has won a lawsuit against you, the court enters a monetary judgment against you. According to the laws of Kentucky, all judgments act as an automatic lien against any real property located in the commonwealth of Kentucky. The creditor must file the judgment with the county clerk and notify the debtor of the lien.
Bankruptcy
Bankruptcy actions fall within the jurisdiction of the United States federal courts; however, state exemption laws govern the exemptions to which a debtor is entitled. Once you file for bankruptcy protection, the court enters an automatic stay that prevents all creditors from starting or continuing collection efforts for debts you owe. Filing for bankruptcy does not remove a lien from personal property, but it will stop any efforts to collect on the judgment. Depending on which type of bankruptcy you file and the reason for the judgment, the judgment may ultimately be discharged and the lien on your real property removed.
Exemptions
Most states, including Kentucky, allow a debtor to declare a certain amount of property, assets or income exempt from creditors. Kentucky allows a $5,000 homestead exemption for all proceedings as well as a $1,000 general exemption in bankruptcy proceedings. Claiming an exemption protects your property from a creditor up to the amount of the exemption. The general bankruptcy exemption may be used along with the homestead exemption if you have not used it for anything else which provides another $1,000 exemption for your property.
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