Tag Archives: judgment liens

Pay Attention When Filing for Bankruptcy

When you file for bankruptcy, you are required to provide a ton of information to the Court and the Trustee assigned to your case.  Although it is true that no one is perfect, everyone makes mistakes, there are things about all of our lives that we frankly don’t know; none of that explains the multitude of phone calls I get from people who seem to know less about their lives than I do — and I haven’t even met them yet.

When I get a call from someone about filing for bankruptcy I begin by asking some basic questions — about how much debt, what kinds of debt (credit cards, medical bills, taxes, repo’s, pending law suits, student loans, child support), whether or not the person has been sued recently, have they filed their taxes, do they own their home, are they current on mortgages and car debt.  I’m not looking for exact figures, but I do expect that people have a basic grasp on things.

When I get answers that don’t make sense, I start typing.  I start with the Supreme Court’s online network that includes dockets for all Oklahoma District Courts.  It is searchable by name.  That shows me very quickly every lawsuit filed in the last ten or more years against someone (although, admittedly, when someone’s name is Tim Smith, this is less than helpful).  Then, I check the County Assessor’s website for real property ownership records — again, searchable by name.  Then, I check the County Clerk’s website for judgment liens, tax liens, transfer of real estate, mortgages and UCC-1 filing statements.

In just a couple of minutes I frequently know a lot more about the person I’m talking to then they seem to.  I can’t count the number of people who tell me that they’ve never been sued — they are just having their wages garnished.  Really?  Sure, child support and some student loans can do a wage assignment or administrative garnishment without a lawsuit; but that is almost never the case.  They just weren’t paying attention to the question, or they didn’t want to admit to it, or — something; and to a large extent it is my job to try and catch when a client isn’t paying attention and doesn’t answer something correctly or accurately; but there are limits to what I can do.

Ultimately, it is the client who signs bankruptcy papers.  It is the client who can have his discharge denied for failure to disclose assets, or even liabilities.  It is the client who can go to jail for bankruptcy fraud.

I understand that the events that frequently lead up to a bankruptcy filing are the kinds of things that get out of control and thinking about them can be at best depressing and at worst terrifying.  Still, if you tell your lawyer about the garnishment summons your employer just got, your lawyer can help you get your case filed in time to stop it, notify the creditor to release it ASAP when the case is filed, possibly even help recover funds.  If you tell your lawyer that your Mother has added your name to her house — to avoid probate, of course.  In addition to helping you educate your Mother about better and safer options, your lawyer can help keep your Mother’s house out of your bankruptcy.  If you tell your lawyer that you have been sued, your lawyer can help you determine whether or not you need to have judgment liens removed from your house.

Oh, and if you don’t tell your lawyer about these things, odds are very good that your Bankruptcy Trustee will find out about them.  Of course, that will happen after the case is filed, and your hands will be pretty much tied.

So, if you find yourself thinking that you have more debt than you can pay.  Stop.  Take a deep breath — and think.  Think about all the things you have been trying not to think about, because it is just all too foreign and overwhelming.  Then, call a local bankruptcy lawyer for help; and be prepared to answer questions and ask questions until you are comfortable that you have disclosed everything you need to disclose.


Judgment Liens, Bankruptcy and Getting What You Pay For

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.


Judgment Liens and Bankruptcy

Is it too late to file for Bankruptcy? I’ve already been sued.

I have to file for Bankruptcy THIS WEEK.  I’ve been sued, and the answer date is Monday.

Judgments and judgment liens are creatures of State law, and as such, there is considerable variance around the Country.  This may also be an area of law where I think title attorneys are as ignorant as laymen.

Here’s the skinny.

No, it is not too late to file for Bankruptcy.

Calm down.  Now, breathe.  You have more time than you realize.  We can take a little time, get this done right; and still get you the result you want.

Here is why.  First of all, pending lawsuits against the Debtor are stopped — dead in their tracks — by a bankruptcy filing.  The reason is an order called the Automatic Stay that goes into effect the instant a Bankruptcy case is filed.  Second, that date in the Petition and Summons that you were served with?  That is the answer date.  If you don’t file an Answer, then a default judgment can and will be taken against you — eventually.  It probably won’t happen on the first possible day, but it might happen that week.  In Oklahoma once a Judgment is taken, it cannot be acted upon (i.e., a wage garnishment issue, etc.) for ten days absent some pretty extraordinary events.  So, even if a judgment is taken on Monday, you still have ten days before you need to start looking over your figurative shoulder.

So, what happens if that ten days has passed, and the creditor has recorded its judgment in County records creating a lien on your home?  Simple.  You will pay me a little bit more money, but not a lot more.  Once the Bankruptcy is filed a Motion to Avoid (or remove) the judgment lien from your homestead can be filed.  It is a relatively simple procedure, albeit a bit fiddly.  A motion (which is just a fancy name for a request ) is filed asking the Court to do this.  It must be served on the Creditor.  The Creditor is then given time to object (not likely), then in every case I’ve ever had, the Court grants the Motion and enters an Order that removes the Judgment lien from the Debtor’s home — caveat below.

Now, what happens if the Debtor owns real estate that is not his home?  At that point the Debtor really, really does need to file for Bankruptcy before the judgment lien is recorded.  A Motion to Avoid may only be granted to the extent that the judgment lien is impairing the Debtor’s interest in property that he can claim as exempt.  I have never seen a successful claim of exemption in real estate that is not homestead — at least not using Oklahoma’s exemption statutes.  Of course, filing for Bankruptcy when you own real estate that isn’t your home opens a whole ‘nother can of worms all by itself, but that is a subject for another day.

Another problem is created if you have recently moved to Oklahoma and are not entitled (according to the 2005 Bankruptcy Reform Act) to use Oklahoma exemptions.  If you are using exemptions from another State (or the Federal exemptions) you may have too much equity in your home to be able to avoid the lien.  That is something that you will need to discuss in detail with the attorney you hire to represent you in your Bankruptcy filing.

However, even if you own real estate that isn’t your home or you have just moved here and aren’t entitled to use Oklahoma exemptions, that does not mean game over.  You do still have options, and with a little bit of flexibility you may still wind up with the result that you want.  Those situations, though, get very fact specific very quickly.

Oh, and something that every title attorney should know — but too many of them don’t.  A judgment only becomes a lien when it attaches to real estate, and a judgment cannot attach to real estate after the Bankruptcy is filed and discharged.  So, if you file for bankruptcy and don’t own any real estate, you can’t avoid the judgment liens — because there aren’t any, but the judgments become toothless when the discharge is entered.  So, if you go to buy a house a few years after the Bankruptcy, those old judgments cannot attach to your new house — no matter what the title company may say.

So, if you are going to buy a new house, and the title company is very concerned that something wasn’t done right in your Bankruptcy — call your Bankruptcy attorney sooner rather than later.  The Title company is probably wrong, but if they aren’t your Attorney will need a little time to fix it.