Monthly Archives: August 2013

Judgment Liens and Filing Bankruptcy

By Ryan C. Wood

One of the main purposes of filing bankruptcy is to obtain the bankruptcy discharge. A discharge of your debts in bankruptcy releases you from personal liability for the payment of the debts. There are certain debts that cannot be discharged in bankruptcy (such as child support obligations, student loans (Undue Hardship Discharge exception), recent tax obligations, etc.). In addition to these nondischargeable debts, if you have any secured liens on your property (such as mortgages or car liens), those liens survive the bankruptcy. If you do not pay for the mortgage or the car, the house or car can be foreclosed or repossessed because you used your house or car as collateral for the debt. What happens if you have a judgment lien prior to the filing of your bankruptcy case? Is this judgment lien enforceable after your bankruptcy case is completed and the order of discharge entered? It depends.

Judgment Liens on Real Property

Judgment liens attached to your real property prior to the filing of your bankruptcy case can be avoided if they impair your exemptions. Your bankruptcy attorney should be able to help you file a motion to avoid the judgment lien if this is the case. This can be done in either a Chapter 7 or Chapter 13 bankruptcy case. If the judgment lien is avoided the lien is extinguished and is not enforceable after your bankruptcy case is completed and the order of discharge entered. If the lien cannot be avoided because it does not impair an exemption and there is sufficient equity in your home then the judgment lien remains even after your bankruptcy case is completed. If you have no equity in your home, you owe more on your mortgage than the house is worth, you can strip off judgment liens when filing a Chapter 13 bankruptcy. Your bankruptcy lawyer can help you file a motion to value the real property and strip off the judgment lien along with other junior liens like second mortgages or equity lines of credit in a Chapter 13 bankruptcy case.

Judgment Liens on Personal Property

If you did not own any real estate at the time you filed your bankruptcy case then whether or not the judgment lien attached to personal property depends on the jurisdiction you live in. If the lien did attach to personal property then you can file a motion to avoid the lien if it impairs your exemptions. If the judgment lien did not attach to any personal property, the lien is extinguished once you receive a discharge of your debt. The judgment lien cannot attach to any property you acquire after your bankruptcy case is closed. If any judgment creditor attempts to collect on the lien it would be a discharge violation and the judgment creditor can be subject to sanctions from the court.

My Title Company Refuses to Close on my After-Acquired House

There have been instances where the title company refuses to close on a new house that is acquired after your bankruptcy case is completed until the judgment lien is satisfied. That is contrary to the bankruptcy laws, especially 11 U.S.C. §524 that states that a discharge in the bankruptcy case voids any judgment and operates as an injunction for any commencement or continuation of any collection activity against the bankruptcy filer. If the title company refuses to close on your house for this reason, you have several different options: (1) explain to your title company or their attorney that their actions violate 11 U.S.C. §524 and are sanctionable, (2) fire your title company because they do not know what they are doing and hire a new title company, (3) file your discharge order in the county where the judgment lien is filed, (4) contact the judgment creditor and have them release the lien, (5) if the judgment creditor tries to place the lien on the after acquired property they can be sanctioned by the court for a discharge violation, or (6) reopen your case to file a motion to avoid the lien. Please be aware that in some jurisdictions the motion to avoid lien will be denied because the bankruptcy filer did not own any property on which the judgment lien had attached before the bankruptcy and therefore there was no lien for the bankruptcy filer to avoid. See in re Hamilton, 286 B.R. 291.

Rapper DMX Files for Chapter 11 Bankruptcy Relief

By Ryan C. Wood

Rapper DMX filed for Chapter 11 bankruptcy relief on Monday, July 29, 2013 in the Southern District of New York. The bankruptcy case number is 13-23254. He filed his bankruptcy case under “Earl Simmons” aka DMX aka Dark Man X. He previously filed a Chapter 13 bankruptcy petition back in August of 2009, but the case was dismissed. He also filed a Chapter 7 bankruptcy petition in December of 2009 but did not receive a discharge of his debt.

According to his filed petition and list of 20 largest creditors he has debts like most other consumers: he has small medical debts, credit card collection and other types of collection activity. He also has multiple judgments filed against him that exceed over $400,000. He owes American Honda Finance a little over $21,000 for an unsecured car loan. His largest debts are his family support obligations: one where he owes more than $1.24 million and another where he owes a little over $84,000.

It seems like there are more and more professional athletes and movie stars seeking the advice of bankruptcy lawyers to file for relief. The mortgage meltdown took down a number of wealthy athletes the last few years. Child support and unpaid taxes are also issues that celebrities have issues with, especially retired athletes. Once they retire and they do not receive a check each month cash flow tightens up real quick. Too many fancy leased cars and extravagant homes do not help either. Hopefully DMX will bounce back strong as ever from his bankruptcy filing.

Everyone files for bankruptcy to obtain a “fresh start” in their lives. Everyone makes mistakes whether they are financial or otherwise. The key is recognizing those mistakes and doing something about it. Filing for bankruptcy is not a shameful action. Ask any bankruptcy attorney, the need to file bankruptcy can truly happen to anyone. It can happen to someone that was rich and famous and made some bad investment decisions. It can happen to someone that has to support a family of five working a minimum wage job living from paycheck to paycheck. I always tell my clients that it is a business decision they make when their debts exceed their ability to repay them. Everyone has the chance to correct their mistakes and should not be held prisoner by their debts for the rest of their life. Everyone deserves a second chance for a “fresh start.” Once you get rid of the toxic debts you are free to begin again like DMX will be able to.