Bankruptcy's effect on Judgments and Liens

[GoingDown]

This is a work in progress. As I find more information about this issue, I will post it in this thread, but for now, here's some info about it...

"While Section 524 will not wipe out pre-existing judgment liens, it will prevent the judgment from being enforced against any other property of the debtor. For instance we know that docketed judgments attach as liens on real property acquired by a judgment debtor after the docketing of the judgment (see section 5203 CPLR). However, if the judgment debt has been discharged in bankruptcy section 524 will supersede local law and prevent the lien from attaching and enjoin the creditor from attempting to enforce his judgment."

This is good news in deed, for any people who due to certain circumstances have to put off filing for bankruptcy for so long that the debt collectors get a chance to file lawsuits against them and end up with judgments and liens against them.

If any of you find any more info about this, please feel free to post it in this thread.

[no_it_all]

<snip>
This is good news in deed, for any people who due to certain circumstances have to put off filing for bankruptcy for so long that the debt collectors get a chance to file lawsuits against them and end up with judgments and liens against them.

Please explain...TIA...

[lrprn]

To read the entire article GoingDown found and pasted part of in his post above, it's at http://www.titleinsuranceny.com/bulletin/bull0006.html

[no_it_all]

Thanks for posting the link. After reading the entire article, I am still confused as to why this is "good news indeed" for someone that has to put off filing BK for whatever reason.

All the article says is that:
Judgement Liens do survive a BK

and

Judgement creditor cannot move the lien to a property later acquired by the debtor...

from the article:
While it is true that a bankruptcy discharge will relieve a debtor from any personal obligation to pay the judgment debt IT DOES NOT DISCHARGE JUDGMENT LIENS ON THE DEBTOR'S REAL PROPERTY. Nor will the discharge enjoin a judgment creditor from executing on the debtor's real property after bankruptcy.

So, again why <exactly> is this good news??

[GoingDown]

Once again, it is concerned with real estate property that the debtor owns prior to BK...
"What is discharged by section 524 is the debtor and not his property. The operative language in this section is the qualifying term "as the personal liability of the debtor". While it is true that a bankruptcy discharge will relieve a debtor from any personal obligation to pay the judgment debt IT DOES NOT DISCHARGE JUDGMENT LIENS ON THE DEBTOR'S REAL PROPERTY. Nor will the discharge enjoin a judgment creditor from executing on the debtor's real property after bankruptcy. All liens (not just judgment liens) on the debtor's property survive bankruptcy unless they are avoided as a preferential or fraudulent transfer or dealt with or avoided under some other provision of the Code. The legal effect of the bankruptcy discharge is to convert the judgment into a non-recourse secured debt which can only be enforced against the real property affected by the judgment lien.

While Section 524 will not wipe out pre-existing judgment liens, it will prevent the judgment from being enforced against any other property of the debtor. For instance we know that docketed judgments attach as liens on real property acquired by a judgment debtor after the docketing of the judgment (see section 5203 CPLR). However, if the judgment debt has been discharged in bankruptcy section 524 will supersede local law and prevent the lien from attaching and enjoin the creditor from attempting to enforce his judgment."


"What is the legal effect of this discharge on a docketed judgment lien on real property owned by a debtor prior to bankruptcy?"

Indeed, it won't help a debtor who already owned real estate and had a lien BEFORE BK.

But, that's not my situation. I do not own any real estate.

The good news for debtors who do not own any real estate, or for those that lose their real estate during BK, is that after BK, they can purchase or otherwise acquire real estate and not have to worry about the discharged judgment attaching itself as a lien to their newly acquired real estate, because "if the judgment debt has been discharged in bankruptcy section 524 will supersede local law and prevent the lien from attaching and enjoin the creditor from attempting to enforce his judgment."



Notice the wording here...

"All liens (not just judgment liens) on the debtor's property survive bankruptcy unless they are avoided as a preferential or fraudulent transfer or dealt with or avoided under some other provision of the Code. The legal effect of the bankruptcy discharge is to convert the judgment into a non-recourse secured debt which can only be enforced against the real property affected by the judgment lien."

If the debtor has no real estate property, the power of the judgment dies out. There is no recourse after BK.

I am going to ask a few local Arizona attorneys about this to see what they have to say and I will paraphrase their responses in this thread.