If I file CH.7 after a judgment is issued, can creditor attach a lien on my home?

[cardman]

Wow, I’ve learned so much in this forum. A heartfelt thank you to all!

I’m going to try and be as brief and clear as possible to explain my overall situation and provide you with some context and background information:

* I live in Texas and my home is paid in full. Due to the $60K personal property exemption all my other assets including my IRA are exempted. My current incomes is below the median in my county and thus, qualify for CH7.

* I lost my job earning a bit over100K per year in early 2009. I had savings that lasted until the end of December 2009. Since I couldn’t find employment, I started a service business in mid August 2009. Expectations were high and the business started to take off nicely plus I had a verbal commitment that I was going to sign-up a very large business account in May 2010 that would have netted me over $50K plus residual income; however, the deal never materialized and business in general started to significantly decline in April 2010. So far, overall results have been disappointing (not sufficient income). Credit cards have been utilized –not so smartly, I must admit, just to keep going (now they are all maxed out).

* To complicate the matter, over 65 ex-coworkers –including myself, were named in a civil complaint September 30, 2009 (the lawsuit is not from any creditor I currently own money, it is something complete unrelated). About 19 of us retained the same lawyer so legal fees would be tamed.

* I already had 3 credit cards with a $38K total line of credit. However, since my savings were dwindling and on top of living expenses I had to factor in legal fees, I kind of panicked and between October and December 2009 I applied and got 7 extra credit cards ($47,000 total new credit line). All CC’s applications were done online and I stated my income on projected annualized income, not actual earnings.

* My CC utilization has been a combination of purchases, balance transfers and cash advances (those pesky checks the cc companies send you, although very attractive 2.99% for 12 months) deposited to my checking account so I could have a cushion and not miss the minimum payment due.

* In February 2010 I spent $25,000 (spread out on 3 different cards) for a trip with the whole family, due to a life cycle event. My share of that trip was $12,800 and my brother in law paid me the difference ($12,200) in a check which I deposited to my checking account. (I know it was stupid to spend this amount of money, but hey, I was going to land this big account in May –hindsight is always 20-20)

* Besides this large $25,000 cc charge, and a $10,000 retainer fees for my lawyer, everything else charged has been for food, cellular phone, medical, etc.
Cash advances and balance transfers are as follow:

Balance Transfers:
CC #1 – 10/14/09 - $490
CC #1 – 10/14/09 - $6,000
CC #3 – 10/29/09 - $1,000
CC #3 – 10/30/09 - $1,500
CC #3 – 12/28/09 - $2,715

Cash advances:
CC #2 – 10/20/09 - $9,000 direct deposit to checking account
CC #4 - 01/04/10 - $7,000 direct deposit to checking account
CC #4 – 01/22/10 - $2,600 direct deposit to checking account
CC #5 – 02/24/10 - $10,000 (Promo check 2.99%) deposited to checking account.
CC #5 – 03/25/10 - $1,002 (Promo check 2.99%) deposited to checking account.
CC #5 – 05/21/10 - $150 (Promo check 2.99%) to pay down other credit card.
CC #5 – 05/21/10 - $540 (Promo check 2.99%) to pay down other credit card.

* The last time I made a charge to cc’s was on 11/26/10 and minimum payments have not been missed.

* Two weeks ago, my lawyer updated us on the lawsuit and to our surprise; it seems very likely that we will lose the case (my liability on this is for over $250K). If it goes to trial, the outcome can probably be stalled until September-October 2011. However, the other party in the lawsuit has filed a petition for a Summary Judgment against another ex-coworker which is represented by another lawyer. Our lawyer has told us that if that Summary Judgment is granted, we all are very likely to face the same situation.

I have not seek advice from a BK lawyer (yet) because after reading many posts in this forum, once I retain a BK lawyer I’m deemed insolvent. Therefore, I will very much appreciate your advice and wisdom on the following questions:

1) After reading many posts, I need to wait at least 90 days after the last cc charge I made in my credit card (at least February 24/2011), so I can start seeking advice and retain a BK lawyer. Also read that regarding cash advances, the “safe zone” would be to wait at least 10 months which is approximately March 20/2011.
In order to avoid an AP, which date is the earliest I should file CH7?

2) The last minimum payment to all 10 cc’s was made December 23, 2010. Should I continue paying one or two months more of minimum payments ($1,700 per month) or stop immediately and save the money to pay a BK lawyer?

3) What happens if a judgment is issued before the recommended filing date? Can they attach a lien on my home? If so, would I be able to vacate it after filing or it will it survive? My main concern is if I need to move somewhere else will I lose my house due to that lien?

4) Please play “devil’s advocate” and advice where do you see possibilities for creditors to oppose a discharge, or an AP proceeding.

Sorry, I promised to be brief but it seems it ended up long; however, I think you need the whole picture to render sound advice.

Again, your wisdom will be appreciated greatly.
Thank you in advance.

[HHM]

If they file a lien BEFORE you file BK, yes.

[cardman]

Thank you for your prompt response HHM.

I’m assuming the “yes” means if I sell my house all sale proceeds goes to the creditor, correct?

Would you mind responding the other 3 questions?
Thank you again.

[dneil]

But once you file bankruptcy, the attorney can have the lien removed.... right? I was told to not worry about any judgments prior to the bankruptcy because there was nothing my attorney couldn't undo through the bankruptcy. Is this true?

[HHM]

But once you file bankruptcy, the attorney can have the lien removed.... right? I was told to not worry about any judgments prior to the bankruptcy because there was nothing my attorney couldn't undo through the bankruptcy. Is this true?

That is "mostly" true. It will come down to the value of assets. If a judgment creditor perfects its lien, and the lien'ed property has equity beyond what the exemption can protect, the lien will survive as to the amount of that non-exempt equity.
For example, if you own a home worth $200,000, your mortgage is $140,000, your homestead is $50,000, and the judgment creditor files a lien, if you file BK, the judgment creditor still has a claim for that non exempt $10,000 of home equity.

[HHM]

As to 1; you are pretty much clear regarding recent usage. Those time periods are just "guidelines". No one can say for sure if an AP will be filed. Your heaviest usage based on what you posted is nearly a year ago; I wouldn't be too stressed out of the threat of the AP. If the money was ultimately used for necessary expenses, and you made minimum payments, those charges are not objectionable.

As to 2; speak to YOUR BK lawyer about this issue. However, let practical reality be your guide. If you CANNOT afford the payments, then stop.

As to 3; See my previous post. If a judgment is entered, the creditor can file a lien, and that lien WILL attach to any non-exempt equity. However, if you have no non-exempt assets, then the lien can be valued at zero and vacated.

AS to 4; One worse case scenario would be if the law suit you are involved in, if that debt (the judgment) would be considered a non-dischargeable debt (not because of the judgement, itself, but because of the underlying nature of the claim).

[HHM]

Thank you for your prompt response HHM.

I’m assuming the “yes” means if I sell my house all sale proceeds goes to the creditor, correct?

Would you mind responding the other 3 questions?
Thank you again.

It depends. The judgment lien gets behind any other liens currently on the house (e.g. mortgages). So, if you sell your house and the creditor has a perfected lien, and assuming there is some equity for the creditor to get, they would get that equity.
As in my example, if your house is worth $200,000 and your mortgage is $140,000, (if you DID NOT file BK and just sold the house), the judgment creditor would get $60,000.

[cardman]

Thank you again HHM for responding,

The lawsuit I’m involved is civil not criminal, and the underling case is “fraudulent conveyance” (Our former boss is being accused of fraud, and at least part of our salaries are being claimed as “fraudulent conveyance” by the trustee in charge of the bankruptcy). Therefore, I’m just guessing the debt would be dischargeable –any lawyer’s opinion in this forum would help a lot.

Also, as you probably already know, Texas is a very consumer friendly state regarding BK. Let me just say that in Texas, the exemption for homestead is pretty large and my house is maybe worth $175K, well within the limits.

Unfortunately as it stands now, the question for filing BK7 is not if, but when. I guess a better way to phrase this question is: should I file preemptively or wait until the time is right to file, regardless if a judgment is issued earlier, since once I file, I can later vacate it. My main concern is not losing the equity on my house.

I know, I will need to speak to a BK lawyer, but correct me if I’m wrong, I need to wait at least 90 days after the last charge I made to my CC’s to speak with one, because of the issue that I mentioned in my original post, that the date when you consult with a BK lawyer is the date you are deemed insolvent.

Sorry if I’m being redundant, but you guys are the only people I can trust until I can talk to a lawyer .

[OHBOY]

Does Texas not have very nice homestead exemptions ? I was under the impression that NO LIEN CAN BE ATTACHED TO A HOMESTEADED PROPERTY AS IT WOULD CLOUD THE TITLE AND INTERFERE WITH THE HOMESTEAD RIGHTS (other than Mortgage, back Taxes, HOA back payments, 'Mechanics' lien ).
Am I 'missing' something ?

[cardman]

OHBOY, I hope you are right. However, we should not disregard HHM point of view. I hope she will clarify.