By the time people file for Bankruptcy, they can have a wide variety of liens attached to their homes — judgment liens, tax liens, m & m liens just to name a few. The Bankruptcy Code allows for judgment liens to be removed from the Debtor’s homestead to the extent it impairs an exemption. Obviously, what this means is going to vary by State; but in Oklahoma this means that a judgment lien owed by the Debtor can be removed from the Debtor’s homestead assuming certain things are done during the course of the Bankruptcy.
A judgment lien is avoided, or removed, by filing a motion, serving the motion on the proper parties, dealing with any responses that may come in; and then, assuming that all was as expected, submitting an Order finding that the lien should be avoided. This is generally a fairly simple and straightforward process. (I said generally, there are tons of fact specific exceptions to this rule.) From the attorney’s perspective the trick is knowing when this needs to be done.
It is certainly fairly common for an attorney to identify that avoidable liens are either present or might be present while preparing the case for filing. Of course, there may be liens that don’t come to light during that process. There is also the problem that most attorneys charge more to do a Bankruptcy if they will be avoiding liens than if they don’t; and there may be times when avoiding a lien is really not necessary. Then, of course, there is the problem of seeing something that indicates there might be a lien while preparing the case, the case doesn’t get filed for months (for whatever reason) and now the attorney is supposed to remember that he needs to investigate this possible lien and then file the motion.
The solution to that is that most attorneys put in our engagement agreement with our clients what they must do if they want us to avoid a judgment lien. My engagement agreement requires that my clients provide me with a file-stamped copy of the Statement of Judgment. I also build a little extra money into my flat fee for doing the Bankruptcy for avoiding the lien. If that doesn’t happen, then I have not been hired to avoid that lien.
Here is why that is important. It is fairly simple (generally) to avoid a judgment lien in the bankruptcy. It is a pain in the backside to do it if the case has already closed and must be reopened. You can pretty well bet that if a client hired me to avoid a judgment lien, and for some reason I didn’t do it and the case closes when I figure this out, I will be moving very quickly to reopen the case and get it done — and on my own dime.
However, what happens more frequently is that I get a call from someone who filed a Bankruptcy with another attorney. A lien wasn’t avoided, the person is trying to sell or refinance the house and now there is a problem. They call their former attorney who discovers that for whatever reason the client didn’t hire them to avoid the lien in the first place. The attorney tells them he will charge them almost as much to avoid the line as he did to file the bankruptcy. So, they decide to shop around. Just last week I quoted a fee to reopen a case and avoid a lien for someone who had filed with someone else. The figure I quoted was substantial. There was a long pause, and the woman on the phone said that was the same figure her lawyer had quoted her.
The moral of this story is make sure you know what you need to do to get the result you want, make sure you know what you are paying for and what you aren’t paying for. It should all be in your engagement agreement with your Bankruptcy attorney, and if you have any questions, ask sooner rather than later. If you are reading this and you have been sued before filing for Bankruptcy, you should know that you need to ask specifically about you find out if a line has attached to your house, if it has, what you can do about it; and what your attorney expects from you to make it happen.