Judgement debt discharged in BK...but attorney wants $10,500 to release judgement!

[despritfreya]

PHXDWTN,

Just curious. Have you had the chance to contact FAT or were you able to get your title company to understand the ramifications of the State homestead law? Or, were your efforts an exercise in utter futility?

I will check back in the am to see if you responded.

Des.

[AngelinaCatHub]

OK, I'm also totally confused. What do you mean by saying "it could ride on your name."? Are you saying that if a creditor has a judgment AND a lien on someone's property, even if that specific property is foreclosed on by the mortgage company, the lien can attach to future property of the debtor - in SPITE of the debt being discharged in bk? That doesn't make any sense. Am I reading into this?

I am also confused by the numerous times that I have seen people say to get the judgment vacated with the court, but now it seems that it's not really possible to do???

Again, thanks to everyone who spends so much time trying to explain things to us out here in cyberspace - you are truly appreciated by myself and so many others. Special thanks to Des and HHM and MsBKLawyer and AngelinaCatHub and AngelinaCat and all of the other moderators for all that you do.

I'm sure I will be corrected if wrong, and that is fine. A Judgment is on your name and all that you own. A creditor can do many things, such as garnish, writ of attachment, levy, etc.

If you bk all that can be set aside.

If the Creditor files a lien on a specific item, it is on that item only. He cannot do the above. The lien is on a single item like a real estate. If he dies, or otherwise the lien has to be paid. If he bks, it still sticks. Best I can do. 'Hub

[PHXDWTN]

PHXDWTN,

Just curious. Have you had the chance to contact FAT or were you able to get your title company to understand the ramifications of the State homestead law? Or, were your efforts an exercise in utter futility?

I will check back in the am to see if you responded.

Des.

Haven't heard back from them yet. I called this morning and told them that a) there can't be a lien on the home since it's the primary residence and b) the debt on the judgment is $0 so there isn't anything to pay prior to closing anyway. I was toldmtheir title dept will look into it and contact me. I'll keep you updated as I find out.

[PHXDWTN]

I heard back from the title company and they said this:

We are good w/ the judgment lien - since this is the primary residence you can sign an Affidavit of Homestead at closing. This does not delete the lien, you will still owe it. We just don't have to pay off thru this escrow.

** But, I will still need something from the bankruptcy stating that you are allowed to Short Sale and Sell this property.

Honestly it doesn't sound like she knows that she is talking about. I already told her the BK is closed and there is nothing for a judge to give that states I am allowed to short sale the house. The BK file did just close this past Friday so maybe they haven't seen it in the system yet. I emailed her the docs I got from court showing it's closed.

On the judgment, she is still saying there is a lien...but there isn't! I don't even know where she got the information, I think she called the debt collector's attorney directly who of course said I have to pay to release the judgment, they want their money.

[despritfreya]

Honestly it doesn't sound like she knows that she is talking about. I already told her the BK is closed and there is nothing for a judge to give that states I am allowed to short sale the house. The BK file did just close this past Friday so maybe they haven't seen it in the system yet. I emailed her the docs I got from court showing it's closed.

Ok, so now you have moved in the correct direction. As it relates to the closing, the Title Company would be correct. Until the property is abandoned (happens when case is closed), it would need a Court Order allowing the close of escrow. However, once the case is closed (as you said this has just happened), this issue should go away.

On the judgment, she is still saying there is a lien...but there isn't! I don't even know where she got the information, I think she called the debt collector's attorney directly who of course said I have to pay to release the judgment, they want their money.

There is a recorded judgment. If you owned other real property (not your homestead) there would be a lien. In that sense she is correct. However since you do not own other property the recording of the judgment and hence the lien has no legal significance.

I am glad that you were able to persuade the title company that it was incorrect to assert that the judgment impaired your ability to sell the homestead residence.

Des.

[SunshineGal]

Hi PHXDWTN,

The title Co. is protecting themselves, they want to make sure the home is not part of the BK Estate. I'm sure Des can explain that part far better than I'll be able to.

As for the lien, yes, it is still there, and will attach to any real property you buy in the future unless the lien is vacated through the courts. The debt has been discharged, but the lien still remains. You really want to get this taken care of if you plan to buy a house in the future, otherwise, you could end up going back through this nightmare again. While a Title Co. may not require it to be paid on a homestead property, I can assure you a lender will.

Judgment liens vary from state to state, for instance, in order to attach to real property in the state of FL, the creditor MUST file a certified copy of the judgment in the Official Records of the county clerks office. To attach to personal property, it gets submitted to the State of Florida. I would guess that the judgment has been recorded in your county records and showed up on the title search.

Hub was close. A judgment recorded in the county records automatically attaches to all *real property* the debtor owns in that county until the lien has been satisfied or vacated. However, after the judgment has been included in a BK, the creditor cannot take action to collect the debt such as garnishing wages, bank accounts, etc. The creditor is under no obligation to record a satisfaction of judgment and the majority will not unless you pay the debt.

Hope that helps.
SG

[PHXDWTN]

There is a recorded judgment. If you owned other real property (not your homestead) there would be a lien. In that sense she is correct. However since you do not own other property the recording of the judgment and hence the lien has no legal significance.

I'm still confused on this. Yes there is a recorded judgment, but that recorded judgment has a $0 balance attached to it...so if I did own another property, what would the amount of the lien be? Isn't the lien usually in the amount of the debt owed?

[PHXDWTN]

As for the lien, yes, it is still there, and will attach to any real property you buy in the future unless the lien is vacated through the courts. The debt has been discharged, but the lien still remains. You really want to get this taken care of if you plan to buy a house in the future, otherwise, you could end up going back through this nightmare again. While a Title Co. may not require it to be paid on a homestead property, I can assure you a lender will.

Hub was close. A judgment recorded in the county records automatically attaches to all *real property* the debtor owns in that county until the lien has been satisfied or vacated. However, after the judgment has been included in a BK, the creditor cannot take action to collect the debt such as garnishing wages, bank accounts, etc. The creditor is under no obligation to record a satisfaction of judgment and the majority will not unless you pay the debt.

But what debt if the debt was discharged by BK? I mean the debt amount attached to that judgment is $0...so what are you supposed to pay?

Hopefully the court will grant my Motion to Dismiss Judgment and I can be done with this whole mess.

[SunshineGal]

I'm still confused on this. Yes there is a recorded judgment, but that recorded judgment has a $0 balance attached to it...so if I did own another property, what would the amount of the lien be? Isn't the lien usually in the amount of the debt owed?

Yes, generally speaking, the judgment is in the amount owed. Think of it this way - you owed XYZ $10,000 + whatever interest and fees. The BK discharged the debt, however, XYZ still has a valid lien in the amount of $10,000 + costs and fees. They can't move to collect on it against you, but they are under no obligation to record a satisfaction, which is the form that would cancell the lien. This is why it's so important to vacate the judgment after a BK.

[SunshineGal]

Hopefully the court will grant my Motion to Dismiss Judgment and I can be done with this whole mess.

I'm not a lawyer, but I don't think the court can dismiss a judgment that has already been granted, at this point I think you need a "Motion to Vacate"

[PHXDWTN]

I'm not a lawyer, but I don't think the court can dismiss a judgment that has already been granted, at this point I think you need a "Motion to Vacate"

Sorry, that is what I meant...I filed a "Motion to Vacate Judgment".

[PHXDWTN]

. While a Title Co. may not require it to be paid on a homestead property, I can assure you a lender will.

Can you expand a little on this? Are you saying that when I buy a new house, I won't be able to (the lender will not give me a mortgage) if there judgment is still on my name?

What about other things like a car?

[despritfreya]

I'm still confused on this. Yes there is a recorded judgment, but that recorded judgment has a $0 balance attached to it...so if I did own another property, what would the amount of the lien be? Isn't the lien usually in the amount of the debt owed?

1. There are two kinds of creditors
a)secured and
b)unsecured.

2. In the context of a bk while the underlying debt owed to a secured creditor is wiped out, the creditor's interest in the collateral (lien) is not.

3. There are two subclasses of secured creditors -
a)ones holding "consensual liens" such as mortgages, vehicle loans etc. and
b) ones holding "non-consensual liens" such as properly recorded judgments.

4. In a bk, without avoiding the lien (in general, not possible as it relates to consensual liens), all liens pass through the bk unaffected. This is why (for purposes of explanation) a debtor who wishes to keep their vehicle will continue to pay the creditor. If they don't the creditor has the right to take back the property which secured the debt. The creditor cannot recover $$ but can recover the property.

5. As it relates to the “non-consensual” subclass, a judgment creditor can, under State law, record the judgment. This becomes a lien against property as allowed by State law. A creditor holding a "non-consensual" judgment lien can seek to satisfy the judgment by forcing a sale of property, however, not if that property is protected by a State allowed exemption.

With me so far?

The reason your judgment lien has no legal significance in Arizona is that under Arizona law, the recording of the judgment becomes a lien if you have real property (not personal property) that is not your homestead (primary) residence. If all you have is your homestead there simply is no lien unless the equity in that property exceeds the homestead allowance of $150k.

And, NO, the lien will not attach to after acquired property since it is not enforceable. You do not need to "void" the recording of the judgment. It will be void 5 years after the date of recording by operation of Arizona law since it cannot be renewed. Between now and then it cannot be enforced.

Des.

[PHXDWTN]

Des: Fantastic! Thank you for your explanation (SG above also). I had forgotten about the 5 year thing already so if the judge does not sign off on the Motion to Vacate, the judgment will be void 10/08/2013. Thanks for all the help everyone, this forum is a great asset.

[SunshineGal]

And, NO, the lien will not attach to after acquired property since it is not enforceable. You do not need to "void" the recording of the judgment. It will be void 5 years after the date of recording by operation of Arizona law since it cannot be renewed. Between now and then it cannot be enforced.
Des.

Hi Des,

As always, a great explaination but now I'm confused. A judgment automatically attaches to all real property owned now or in the future, providing the judgment lien is still valid. It is my understanding the lien remains, so how do you keep it from attaching to property owned in the future if you don't vacate the lien?

Thanks,
SG