When a debt is dischargeable in bankruptcy, it does not matter whether an individual files her bankruptcy before or after the creditor obtains a judgment in court. The debt is still dischargeable. However, as a general rule a lien on property is not removed by bankruptcy, and as a bankruptcy lawyer I frequently have to deal with creditors, who obtain a judgement against a person, and then record a judgement lien against the individuals house.
If the person owing money in this situation files bankruptcy, the creditor will never be able to make the debtor pay the money, but the lien remains on the house. While holders of judgment liens seldom find it worth the cost to file a foreclosure action against the property, if the homeowner sells his property, while the lien is still in affect, the lien will show up on the title report, and the debt will have to be paid off out of the proceeds of the sale.
In some cases though a bankruptcy can remove a judgement lien. Under Illinois law an individual is entitled to a $15,000.00 homestead exemption from creditors in the equity of his or her home. If payment of the judgement lien would come out of the homestead exemption, because the debtor has no more equity in his home, the homeowner can bring a motion in bankruptcy court to have the lien removed.
