Thaler Law Firm PLLC
  • Home
  • About the Firm
  • Firm News
  • Professionals
    • Andrew M. Thaler
  • Practice Areas
    • Bankruptcy >
      • Considering Bankruptcy
    • Commercial Litigation
    • Creditors' Rights
    • Mediation
    • Trustee Representation
  • Testimonials
  • Contact
    • Potential Debtor
    • Potential Creditor
  • Blog

If a Home Seller/Client Previously Filed Bankruptcy, Judgment Liens Might Be Extinguishable

9/16/2019

0 Comments

 
Author: Andrew M. Thaler
     A Seller’s attorney undertakes to do many things in order to successfully close a real estate transaction.  After the contract is signed, the Buyer’s attorney will produce a title report for review and analysis by Seller’s attorney. There will invariably be objections to title that need to be cleared before closing.  Importantly, there may be unsatisfied judgments to clear.

     In most instances outstanding judgments will be resolved (i) by supplying the title company with an affidavit that the judgment debtor is not the selling party; (ii) by obtaining a Satisfaction of Judgment for previously satisfied debts for which a Satisfaction was never filed with the County Clerk; (iii) if the title company permits, by depositing 2x the face amount of the judgment in escrow pending clearance by Seller. In other instances the judgment will either be settled or paid in full with interest at the time of closing. But there is another way to dispose of judgments affecting title. 
     Seller’s attorney should ask their client if the client ever filed bankruptcy and received a discharge.  If the judgment was docketed before the bankruptcy it may be possible to remove the judgment in full or in part if the judgment(s) impaired the allowable, at that time, homestead exemption of the client.

     In New York, a debtor that files bankruptcy is entitled to claim a New York homestead exemption of up to $170,825 (as of August 2019) if they live in the metropolitan area.  For a married couple the combined homestead exemption is twice that, $341,650. Essentially, if there is not enough money to pay an owner’s full homestead exemption after deduction of consensual liens, such as mortgages, and statutory tax liens from the fair market value of the property at the time of the bankruptcy filing, the lien(s) can be “avoided” in full or part depending on the math.   

     For example if a person owns a house that is worth $150,000 and there are $250,000 of judgment liens against the house, the judgment liens are avoided in full.  If the house is worth $250,000 the judgment liens will be reduced to $79,175 (assuming an individual filed bankruptcy and not a married couple). The judgment liens are avoided according to the date of docketing of their judgment. The judgment first in time gets paid first and, if there is enough to pay the first judgment, the second judgment gets paid etc. until no money is left.  The analysis and determination of one’s equity in the property can become more complicated where the property is owned by more than one person and there are judgments against the interest of only one of the owners.

     If faced with this situation it will be necessary to make a motion in the bankruptcy court to have the bankruptcy case re-opened for the purpose of vacating judgment liens that impair debtor’s homestead exemption. The prior bankruptcy papers will need to be reviewed to make sure that the debtor is entitled to the homestead exemption. The debtor may have taken exemptions in other property that may limit or negate the ability to void the judgment(s).

     Courts have generally been fairly liberal in granting motions to re-open bankruptcy cases for the purpose of making a motion to claim a homestead exemption that was not taken and/or to seek to avoid judgments that impair the homestead exemption even where the homestead exemption was taken. Often times the debtor is not informed of the ability to void the judgment at the time of the bankruptcy filing or the client does not want to pay the added expense of making the motion. Bankruptcy cases filed 10 years past have been opened for the purpose of avoiding judgment liens.

      In making the motion the attorney  will need to review the prior bankruptcy filing and obtain (i) a  lien search; (ii) a valuation/appraisal of the property at the time of the bankruptcy filing; (iii) mortgage statements and/or tax notices showing balances due on the bankruptcy filing date; (iv) amounts owed on each judgment on the filing date, etc.
​
     More than one real estate closing has been held up or completely aborted because of judgment liens. This strategy might just save that closing in the right circumstances.
0 Comments



Leave a Reply.

    Authors

    This blog is maintained by:
    Andrew M. Thaler

    View my profile on LinkedIn
    Spiros Avramidis
    View my profile on LinkedIn

    Categories

    All
    Bankruptcy Cases
    Bankruptcy Filings
    Bankruptcy General
    Bankruptcy/Matrimonial
    Bankruptcy/Personal Injury
    Bankruptcy/Real Estate

    Archives

    November 2021
    June 2021
    September 2020
    August 2020
    July 2020
    May 2020
    April 2020
    March 2020
    January 2020
    December 2019
    September 2019
    February 2019
    January 2019
    October 2018
    September 2018
    July 2018
    May 2018
    January 2018
    December 2017
    October 2017
    February 2017
    January 2017
    December 2016
    July 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014

    RSS Feed


Thaler Law Firm PLLC
675 Old Country Road
Westbury, New York 11590
Phone: (516) 279-6700 | Fax: (516) 279-6722

Disclaimer
Thaler Law Firm provides the information and materials on its website and blog for informational purposes only. The information is general in nature and does not constitute legal advice.
Further, the use of this information, and the sending or receipt of such information and materials, does not create an attorney-client relationship between us. Prior results do not guarantee a future or similar outcome.

The application and impact of laws can vary widely based on the specific facts involved. Accordingly, the information is provided with the understanding that the authors are not herein engaged in rendering legal, accounting, tax,
or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other advisers.

Materials and information in this presentation is proprietary in nature belonging to Thaler Law Firm and may only be reproduced in its entirety (without modification) for the individual reader’s personal or educational use and must include
this notice of our proprietary interest and the prohibition of reproduction

TLF is considered a debt relief agency.
TLF helps people file for bankruptcy relief under the Bankruptcy Code.
Attorney Advertising | Copyright © 2015 Thaler Law Firm PLLC | All rights reserved
Powered by Create your own unique website with customizable templates.