getting rid of judgment liens against real property in MD

[mysticspirit25]

Question, a friend filed BK, him and his wife are in MD, only he filed BK, their house (which had 300k equity) was exempt because it was titled tenants by entirety and trustee could not touch, thing is, he has over 50k in judgment liens against property (4 judgments), and while creditors cannot enforce those liens bc of the way property is titled, and the underlying judgments were voided by the bk itself, how does one go about getting rid of the liens themself? The liens were in his name, not his signifcant other. Advice?

[HHM]

Unfortunately, the liens SURVIVE the bankruptcy. If there is equity in the property that would allow the judgment holders to get some money from a sale, the liens survive. So even though the underlying debt is discharged, if the liens were properly recorded and if there was equity in the house at the time of filing, those liens will just sit there until they go to sell the house.

[MSbklawyer]

Unfortunately, the liens SURVIVE the bankruptcy. . .

True, but since they are judgment liens, they can be avoided and in effect nullified with a motion by the debtor pursuant to 522(f)(1)(A), to the extent they impair an exemption to which the debtor would be entitled, right?

[mysticspirit25]

But don't forget how the home is titled, tenant by entirety, can't the spouse file a motion to avoid in an AP, since technically in TBE she owns 100% of the property and it is exempeted under federal law as tenants by entirety. In any case, how is this accomplished after the discharge?

[HHM]

True, but since they are judgment liens, they can be avoided and in effect nullified with a motion by the debtor pursuant to 522(f)(1)(A), to the extent they impair an exemption to which the debtor would be entitled, right?

Yes, assuming, of course, the liens actually impair an exemption.

it is exempeted under federal law as tenants by entirety

That is not an accurate way of understanding the issue. Federal law has NOTHING to do with it, ownership interests are controlled by state law. Tenacy by the entirety is not an exemption, it is simply a way of owning property wherby a husband and wife, in certain states, own a 100%, undivided interest in real property. This is a question you need to direct to a BK attorney experienced with TBE issues. You can remove judgement liens if
(1) the liens have no value (meaing there is no non-exempt equity beyond the security interests and homestead exemption).
(2) the liens impair an exemption (of the debtor).
So, I suppose the question is, do the liens have value in a TBE scenario, that I cannot answer with any sort of certainty.

As for how to do it, your instinct is right, to bring any certainty to the liens, the debtor (not the spouse), will need to file an action to avoid the liens.

[MSbklawyer]

But don't forget how the home is titled, tenant by entirety, can't the spouse file a motion to avoid in an AP, since technically in TBE she owns 100% of the property and it is exempeted under federal law as tenants by entirety. In any case, how is this accomplished after the discharge?

My understanding is that in non-community property states, judgments against only one spouse do not attach to TBE property. Likewise, one spouse alone cannot voluntarily encumber TBE property.

If for some reason the liens can't be avoided in bankruptcy, then a quiet title action might do the trick to have the liens removed.

[pookieny]

Unfortunately, the liens SURVIVE the bankruptcy. If there is equity in the property that would allow the judgment holders to get some money from a sale, the liens survive. So even though the underlying debt is discharged, if the liens were properly recorded and if there was equity in the house at the time of filing, those liens will just sit there until they go to sell the house.

But only for 10 years though, right?

[justbroke]

Florida non-bankruptcy law grants full protection to any property so titled (or recorded) as a tenancy by the entirety (TBE); however, and as HHM eludes, this is covered by the Florida Constitution (Article X, Section 4). In Florida, if this lien was against your homestead, it would certainly impair your unlimited homestead exemption, and you could file (or should have filed) an 11 USC 522(f) motion as MSbklawyer suggested. (I almost had to file 2 of these, but for other property.)

MSbklawyer is also on point when he mentions that if only one person within the marriage owes to a single creditor, the single spouse cannot encumber the property that's TBE. However, if it's a joint debt... the TBE doesn't protect the property as to that creditor.

Now, I know nothing about quieting a title. Perhaps a "shut up" would work, but I'm sure it's more involved than that. LOL