Lein Found After Bankruptcy

[TeresaCrew]

What is the name of your state? Idaho

We recently declared ch 13 bankruptcy. Case was filed in July and closed in Oct. I just found that there was a lein placed on the house by an opposing atty in a lawsuit settlement back in May. This settlement was included in the bankruptcy, but we were unaware of the lein. Short of reopening the case, which will cost over $500 that I don't have, how do I get rid of this lein? Can I contact the atty that applied it with the bankruptcy discharge letter and have them remove it? Will it eventually just disappear on it's own? HELP!

 

[HomeGuru]

What is the name of your state? Idaho

We recently declared ch 13 bankruptcy. Case was filed in July and closed in Oct. I just found that there was a lein placed on the house by an opposing atty in a lawsuit settlement back in May. This settlement was included in the bankruptcy, but we were unaware of the lein. Short of reopening the case, which will cost over $500 that I don't have, how do I get rid of this lein? Can I contact the atty that applied it with the bankruptcy discharge letter and have them remove it? Will it eventually just disappear on it's own? HELP!

**A: how did you now find out about the lien rather than at the time you file BK?
Once the lien is recorded on title the only way to release it is to pay if off. It could be stripped on a sale depending on your equity but since you filed a 13 it appears you want to save your home rather than sell it.

 

[JETX]

With all due respect to HG, I disagree with his opinion.

Your post says that the lien was a result of a "settlement was included in the bankruptcy".
If that is correct, then the settlement (and resultant judgment and the lien) would be included in the bankruptcy process.
Have your attorney instruct the lienholder to release the lien since its underlying debt/judgment was included in the bankruptcy filing.

 

[HomeGuru]

With all due respect to HG, I disagree with his opinion.

Your post says that the lien was a result of a "settlement was included in the bankruptcy".
If that is correct, then the settlement (and resultant judgment and the lien) would be included in the bankruptcy process.
Have your attorney instruct the lienholder to release the lien since its underlying debt/judgment was included in the bankruptcy filing.

**A: here is how I see it. Litigation resulting in an judgement in May. Writer files BK in July. Creditor files a judgement lien prior to the BK filing. The writer has no knowledge of the lien therefore lists the amount of the judgement on the BK petition schedule as an undsecured debt. Since the debt is secured on real property, it is not discharged in BK. The lien was not a result of a settlement in BK but was due to an related court case prior to the BK filing.

 

[JETX]

But the lien does not 'create' a security interest and would not be a 'secured debt'.

Further, the lien is based on a debt that was included in the filing, therefore, when the debt is discharged, the lien is no longer valid (since the underlying debt is gone).
The writer can simply ask/demand that the lien be released.
And can ask the court to set aside the judgment as included in bankruptcy.

 

[TeresaCrew]

Thank you for your spirited debate. This is the exact debate that we have going on in the house right now. I agree with JETX and my husband agree's with HomeGuru. The only reason that we filed bankruptcy was to save the house and our 2 cars which we need for work. I found that the lein was still on the house while trying to combine my first and second mortgage. My husband thinks that out atty should write a letter for free to the atty that placed the lein to have them remove it, our atty's stance is the only way to get rid of the lein is to re-open the bankruptcy and re-close it, plus pay the same fee's that I paid for the first bankruptcy to fix what should have been caught. My atty said that they sent notice to make sure that that was all our debt, we had our credit report and statements but had no idea that the lein was placed nor had any clue how to check it.

 

[HomeGuru]

But the lien does not 'create' a security interest and would not be a 'secured debt'.

**A: please explain.
**********

Further, the lien is based on a debt that was included in the filing, therefore, when the debt is discharged, the lien is no longer valid (since the underlying debt is gone).
The writer can simply ask/demand that the lien be released.
And can ask the court to set aside the judgment as included in bankruptcy.

**A: yes, the debt was discharged because it was listed as an unsecured debt in error. Prior to the discharge, the lien had already been flied on title. Therefore there is no automatic lien release.

 

[JETX]

You are putting more to this than it should.

"the debt was discharged because it was listed as an unsecured debt in error."
*** And the lien holder had every opportunity to CORRECT the honest error with the bankruptcy court (since he would have been noticed as a creditor). He didn't, so the lien was included in the discharge.

"Therefore there is no automatic lien release."
*** And I didn't say there was. I did say, and repeat, that since the underlying debt/judgment has been discharged, the writer can simply file a 'motion to set aside' with the issuing court. The creditor would then have another opportunity to argue that the judgment should remain. I predict he would lose that one and the court would set aside the judgment (since it IS included in the filing). Once the judgment is set aside, the lien dies since there is no longer a judgment to support it.

 

[HomeGuru]

You are putting more to this than it should.

"the debt was discharged because it was listed as an unsecured debt in error."
*** And the lien holder had every opportunity to CORRECT the honest error with the bankruptcy court (since he would have been noticed as a creditor). He didn't, so the lien was included in the discharge.

HomeGuru- no, the error was on the part of the BK petitioner. If they had ordered a title report prior to filing, the lien would have been shown on title. You have a point about the notification but secured creditors are not obligated to perfect based on the mere fact that they already have a secured interest in real property.
**********

"Therefore there is no automatic lien release."
*** And I didn't say there was. I did say, and repeat, that since the underlying debt/judgment has been discharged, the writer can simply file a 'motion to set aside' with the issuing court. The creditor would then have another opportunity to argue that the judgment should remain. I predict he would lose that one and the court would set aside the judgment (since it IS included in the filing). Once the judgment is set aside, the lien dies since there is no longer a judgment to support it.

**A: Ok, let's wait and see what really happens on this. The BK 13 may make a difference.

 

[HomeGuru]

Thank you for your spirited debate. This is the exact debate that we have going on in the house right now. I agree with JETX and my husband agree's with HomeGuru.

**A: yes, JETX is very sharp and highly valued contributor here. It is healthy to see such debate.

********
The only reason that we filed bankruptcy was to save the house and our 2 cars which we need for work. I found that the lein was still on the house while trying to combine my first and second mortgage.

**A: what do you mean you "found that the lien was STILL on the house?" Were you aware that the lien was on before? Or you thought the lien was removed due to the BK discharge? And also why were you trying to combine your mortgages? Are you refinancing?
*******

My husband thinks that out atty should write a letter for free to the atty that placed the lein to have them remove it, our atty's stance is the only way to get rid of the lein is to re-open the bankruptcy and re-close it, plus pay the same fee's that I paid for the first bankruptcy to fix what should have been caught.


**A: I agree that your attorney should send a demand notice to the creditor's counsel to file a lien release and send you a recorded copy of same.
**********

My atty said that they sent notice to make sure that that was all our debt, we had our credit report and statements but had no idea that the lein was placed nor had any clue how to check it.

**A: and exactly what did the notice say? Did they respond? If a notice was sent confirming the debt amount, the other side could have responded with a "Yes. that is the correct amount" without stating that they have a lien on the property.
Especially if the notice was to confirm the debt and did not mention anything about BK.

 

[JETX]

"Especially if the notice was to confirm the debt and did not mention anything about BK."
*** Bankruptcy notices to creditors are far more than just a simple note to creditors. It includes a form (B10) which is sent to EACH creditor listed on the matrix asking them to PROVE their claim. It includes a place for noting whether their claim is secured or not.

Here is a link to a standard form showing the options that the creditor MUST do to prove their claim:
http://www.uscourts.gov/bkforms/official/b10.pdf

 

[TeresaCrew]

We were totally unaware of the lein and we were never notified. I found out when I was trying to combine a first and a second to get rid of some AWEFUL interest on the second. My atty wants to re-open the BK13 to include the lein, we don't want to go through that again, nor can we afford it. They are saying that they want $204 for the filing and $250 for the work. If it can just be done with a letter I am all for it. I was actually considering just sending a letter with the circumstance and all the names included to the atty general and seeing what they made of it. The Judgement was the main reason for the BK and we submitted ALL of the paper work that we had from it to our atty. My atty said that it was our responsibility to have informed the court of the lein. I am Joe Blo public and thought that if there was one that it would have shown on the credit report. I would have had to idea how to even do a title check. I was under the impression that this was the atty's job.....

 

[TeresaCrew]

BTW you are all AWESOME! You are giving me hope!