Notice from my attorney about a judgment -- any experience with liens, etc?

[NewPage]

My bk has been on hold for awhile, due to my attorney advising me to wait 90+ days past paying the orthodontist up front for the entirety of my son's treatment. So, I'm waiting until somewhere around May 25 to file.

Today, I received this email from him:

I have attached a notice that I received from American Express’s attorney. As you can see, they intend to enter a judgment against you on or after April 20, 2011. As I recall, you have no meritorious defense in this case, and had originally intended to file bankruptcy to discharge your debt to American Express. I therefore will not file an answer in this case or otherwise defend it further. It is also my recollection that you are putting off filing a bankruptcy due to your tax refund and other matters. I am therefore waiting to hear from you as to when you want to proceed with the bankruptcy. Let me know if you have any questions about these matters. You may also contact my legal assistant, L___, at any time. Thanks and have a good day.

I responded:

Yes, you advised me in February that I should wait 90 days or so after paying for our son's braces to file as you thought the trustee may attempt to collect that money back from the orthodontist. The orthodontist was paid on February 24, so 90 days from that would be May 24, is that correct? (I don't know if 90 days is counted differently in legal proceedings?) I would like to file as soon after that 90 days has passed as possible.

Should American Express attempt to place a lien on the house, can that be removed after the bankruptcy is discharged? In my reading, it seems that a judgment/lien cannot attach to exempt equity in the home, is that correct?

The entire judgment lien can be “avoided”—erased off the title—if that lien “impairs,” or cuts into, your homestead exemption. That is, if after subtracting the superior liens (#2) from the value of the property (#1), the equity in the property to which the judgment lien (#4) would attach is less than the value of the homestead exemption (#3), then that entire judgment lien can be “avoided.”

Can you please advise me regarding the above?

He said:

Your reading of 11 USC 522 is correct. We can file a motion to avoid a judgment lien to the extent the lien impairs your right to claim a homestead exemption. The creditor could object to the motion in order to argue that there is more equity in the property than you claim. I do not have your file in front of me, so can you tell me whether you have equity in the property? Technically a judgment lien can be foreclosed. I am not sure of the procedural steps in Oregon to do this because I have not been involved in a judgment lien foreclosure. I believe them to be rare though. In my experience the creditors typically want a judgment in order to garnish the wages.

What can be done: We can file an Answer to the lawsuit, but I am reluctant to do that since you do not have a meritorious defense. We can file the bankruptcy knowing the trustee may pursue a preference action against the medical providers whose bills you recently paid. Third, you could pay or try to settle with American Express.

My response:

Are you saying that American Express could foreclose on our house?

I have no wages as I do not work. I have 2 bank accounts in my name only that have maybe $100 in them total. No other property.

As for equity in the property. Assessed value is 116950. I don't have exact figures at this time, but the first on the house is around 51,000 and the HELOC approximately 18,400, leaving equity of around 47,550 at this time. Again, that's approximate but relatively close. I don't understand how the equity protection works. Do I have up to 40k of protected equity, or is the entire 50k for a married couple in Oregon protected and then divided between S---- and myself?

His response:

Yes, eventually the creditor can foreclose the judgment lien if they can demonstrate that there is equity in the property beyond superior liens and your homestead exemption. ORS 18.395 protects your homestead from execution up to $50,000 for a married couple.

Does anyone have any experience with this scenario? Have you had a judgment against you pre-BK and had it dealt with during the BK?

Any idea how long it takes from judgment to collection proceedings? Is there a *chance* a lien could be attached to the house in the 30+ days before I file at the end of May, assuming Amex indeed obtains the judgment? Is it a common thing to have a lien vacated?

Thanks.

[daylate]

I have no idea about the lien situation but can't your attorney or a different one file some kind of response to their attempt to get a judgment? Seems to me there is a general response that says something to the effect of I can neither confirm or deny the debt please prove it. That should buy you 30 days at least.

Also is the appraised value a fair market valuation? If not it could be less therefore reducing your equity. As fr s the equity exemption goes it seems to me that you may have an apples and oranges situation. As for the bk, I think you can only exempt half;but as far as them foreclosing if you can exempt 50k together that may help.

Obviously none of this is legal advice (in cse it wasn't obvious) just some food for thought and some more ?'s for your attorney.

Good luck

[newbie2]

My bk has been on hold for awhile, due to my attorney advising me to wait 90+ days past paying the orthodontist up front for the entirety of my son's treatment. So, I'm waiting until somewhere around May 25 to file.



Any idea how long it takes from judgment to collection proceedings? Is there a *chance* a lien could be attached to the house in the 30+ days before I file at the end of May, assuming Amex indeed obtains the judgment? Is it a common thing to have a lien vacated?

Thanks.

It sounds like the lawsuit already has been filed, and that there was no answer to it. (Hence the "judgment will be filed...") Since you and your attorney have been discussing a lien being put on your home, I have a feeling that garnishment isn't an issue in your state, or levying of your bank account isn't a concern.

I wouldn't worry if it is only a lien on your home. Even if that does happen before you file you simply take a copy of your bankruptcy discharge papers to your courthouse and ask for the procedure to have the judgment lien removed. It is normally a pretty simple process.

[NewPage]

Yes, as newbie2 says, a lawsuit has already been filed; now they are seeking a judgment.

I brought up the lien subject, not my attorney. The only reason I did is because I am not employed so therefore have no wages to garnish. I have 2 small bank accounts, that total maybe $100. Maybe.

I wonder if they think I have a job, or if they just automatically seek judgment in certain cases/amounts, or if they are planning to attach a lien to the house.

The sale value of the house would most likely be under the assessed value. It needs some repairs, paint, new carpet, definitely new windows (many are the original 1928). My husband is an appraiser and believes it would not sell for more than 100k at best.

[newbie2]

Since you are filing for bankruptcy shortly you don't even have to worry about your home being sold to satisfy a lien. (In most states a judgment creditor cannot force the sale of a home to satisfy their lien anyway...they would have to wait for you to sell it to collect.) Just get the BK filed, and if a lien does settle on the house prior to it, you have the lien removed.

[IamOld]

Just an observation - perhaps my own frustration as well - your lawyer seems to be taking the tact that since there is no "meritorious" defense, I'm not going to lift a finger to delay the judgment, when such an answer would delay this through your filing date...

[NewPage]

Just an observation - perhaps my own frustration as well - your lawyer seems to be taking the tact that since there is no "meritorious" defense, I'm not going to lift a finger to delay the judgment, when such an answer would delay this through your filing date...

Yes, that kind of irks me....but I don't know what else to ask him to do, so here I am.

[IamOld]

Yes, that kind of irks me....but I don't know what else to ask him to do, so here I am.

Let me ask this - are you 100000% sure that you will file and WHEN you will file?

If yes, then can you do an answer yourself, if only to delay things till then? AND, would your lawyer get upset with you? (I ask that because - I really got on my atty's nerves, to the point where he told me to stop being overanxious etc., or else...I suppose he's quite right...)

In other words, what I'm asking is can you do an answer yourself just to delay things until your 100000% certain filing?

[PJP]

You're worried that AMEX will proceed with foreclosure and take away the equity in your home that you're otherwise entitled to under the Oregon homestead exemption (50K joint). Assuming you will file for bankruptcy in time, AMEX's attempt to foreclose on your property to collect judgment would be a violation because it would be a preferential treatment (90 days rule). Preferential treatment is void when a creditor shortly before a bankruptcy petition engages in collection activities because it is up to a bankruptcy trustee to determine the order in which the proceeds become distributed to creditors. Any attempt to break this order by a creditor would be a violation. You should be fine.

[NewPage]

What I'm concerned about is Amex putting a lien on the house. I know that the current equity (less than 50k) is exempt under OR law and therefore isn't really an issue. Let me back track a little -- my husband is most worried about a lien on the house. He desires to refi for a lower rate after my BK is over. We plan to have me quit claim when all is said and done so that he can refi in his name only. Just tonight I had to almost draw him a diagram saying that a judgment is against ME, not automatically against the house. Basically he's the one wigging out, which in turn makes me nervous.

So on or about the 20th (tomorrow/today) Amex says they will seek a default judgment. I assume that means they send it to the judge, who then grants or denies it. I can't see why he would deny it, so let's assume it's granted. What happens after that, generally speaking? Does Amex:

A) Try to get me again to pay up by resuming collection attempts? Only this time for more I'd suppose, what with attorney costs, etc.
B) Immediately seek to garnish any wages
C) Immediately try to levy bank accounts
D) Put a lien on the house

Is there a certain amount of time that has to go by between the default judgment and any activity like wage garnishing or bank acct levying? Like 30 days or something?

For there not to be a preferential issue, I need to let 90 days go by b/t payment to the ortho and filing the BK. My husband signed/paid on Feb. 24. So give it an extra day and say 2/25. Ninety days makes that May 25. I've also been reading about the BK court assuming a filer is insolvent in the 90 days prior to filing, so just to put a little cushion b/t the ortho and the 90 days/insolvency, let's say I file around June 1. I'm basically wondering if Amex will have time to do anything between judgment and my filing.

:-)

[newbie2]

NewPage, you would have to go to your courts website to see the procedure in your area for timelines and such after a default judgment has been granted. (Most circuit and district courts have this info online.) If they don't have it online, pop in to the court and ask for documentation. Good luck to you.

[PJP]

NewPage, you’re apparently very knowledgeable in bankruptcy law from your researches. I understand this can be very frustrating. Here is the bankruptcy provision that I found applicable to your situation.

US Bankruptcy Code Section 522 (f)
(1) Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is—
(A) a judicial lien, other than a judicial lien that secures a debt of a kind

US Bankruptcy Code Section 522 (h)
The debtor may avoid a transfer of property of the debtor or recover a setoff to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if—
(1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724 (a) of this title or recoverable by the trustee under section 553 of this title; and
(2) the trustee does not attempt to avoid such transfer.

In your situation, even if AMEX tries to perfect the judgment by recording a lien on your property, that lien should not take away your exemption. Above code provides that your equity comes first. Your lawyer should know to file a Motion to Avoid a Judicial Lien pursuant to Sec. 522. Then what happens is that lien (which is a secured debt) becomes an unsecured debt, losing its priority. Whether secured or unsecured, AMEX creditor’s garnishing wages or any collection activities within 90 days will be void by the bankruptcy trustee. Those collection activities will include A, B, C on your list.

On a side note, Oregon is a non-community property state (I know this since I went to law school in Oregon). This means you own a separate portion of your home equity. That may or may not be 50% of the total equity you and your husband own. I’m assuming AMEX debt is your own debt, and your husband has nothing to do with it (i.e. joint applicant for the credit card). In that case, AMEX can only go after your portion of the property. But like I said above, they cannot eat up your exemption because of Sec. 522.

So now your only concern would be possibly being temporarily deprived of any personal properties if AMEX chose to garnish wages (cannot be your husband’s because he is not their debtor) until the bankruptcy is filed. I’m not sure what the waiting period is in Oregon for judgment. In many states including California, 30 days is a minimum waiting period for plaintiffs to execute a judgment. I would look it up in Oregon. Maybe call a civil court and ask. They may have different waiting periods for default judgments and non-default judgments.

[btbeme]

Here is my answer to your situation...

An attorney will do what his oath says he must do - that is, defend a case on its merits. In this case, AmEx wants to sue you because you owe them money. Your attorney cannot, in good faith, file an answer in court to stall or delay that suit because he sees no legal merit for doing so.

That does NOT, however, keep YOU from filing an answer to the AmEx suit. Filing an answer will buy you some time - a month or two. But you must file an answer properly with the court where the suit was filed.

See the difference? I had the same thing happen - I filed an answer in my county Superior Court, which stalled AmEx by about 45 days and that gave me the time I needed to get my BK filed.

Fear not - a judgement can also get scraped off by a Ch 7, but it takes more work (and more $$$ for your attorney). I suggest doing some homework and filing the Answer yourself. Cheaper, easier than getting a Judgement lifted, etc.

FYI - AmEx sued me the day after I told them I had retained and attorney for the purpose of filing Ch 7 BK. I had about 90 days before I filed BK. Filing an Answer gave me all the time I needed - but I didn't file it until the last few days before I legally had to do so.

[btbeme]

Just an observation - perhaps my own frustration as well - your lawyer seems to be taking the tact that since there is no "meritorious" defense, I'm not going to lift a finger to delay the judgment, when such an answer would delay this through your filing date...

My experience says that a good attorney will do exactly that. they cannot, in good faith and under oath, file an Answer simply to "buy time." They do so only when the merits of the case allow them to do so. Unless they want to run the risk of being disbarred.

A great link for this discussion: http://www.arizonachapter7lawyerblog...mons-in-a.html

[NewPage]

I surely appreciate everyone's answers! I will have to call the court and see what they say, because finding info online around here is like pulling really (really) stubborn teeth. They don't give it away, you have to work (or sometimes pay) for it.