This week I have apparently discovered bankruptcy lawyers who can’t count to 90. Amazing, isn’t it? Yet I’ve reviewed two cases where counsel failed to file the case such that judgment liens fell within the 90 day preference period. And these were cases where the liens had six figure totals and the debtor had assets.
To review: a judgment lien perfected within 90 days of filing may be avoided, and rendered unsecured, if the requirements of § 547 are met. Where I practice, judgment liens are perfected in real property by recording an abstract where the real estate is located, and in personal property, by filing a notice of judgment with the Secretary of State.
So, your intake procedure has to search out these transfers at the beginning, and if there’s a transfer within the period that you want to avoid, you must calendar the last day to file the case and preserve the right to avoid. Judgment liens are discoverable on the public record, and there’s little defense to not looking for them if the client has assets that may be diminished by the perfection of such a lien.
Given the distractible nature of our clients, it may be difficult to keep the client focused and on track to get you want you need to file timely. I suggest that if you aren’t getting full cooperation, you paper your file with a warning letter to the client about the costs of delay.
Many clients are petrified of the filing of a suit, but others are indifferent as to what happens next. They may have chosen to ignore suit, and sometimes even fail to tell you about it or supply the pleadings.
Like most things in this practice, the amount of energy and expense you devote to independent investigation of situation is guided by the situation of the client.
But having identified a meaningful preference, start the countdown to 90.
We’ll talk another day about preferential transfers the debtor might not want to avoid. But counting is required there too.
Image courtesy of Tifotter
Malcolm Ruthven says
Could you expand on bit? My brain isn’t getting what are “these transfers” you speak of. Are “these transfers” the liens themselves, or the perfection of them, or…?
Cathy Moran says
The perfection of the lien transfers rights in the affected property to the creditor, who goes from being unsecured to secured.
So, your Hunt For Avoidable Transfers looks not just for absolute transfers, like the check written to pay off your mother’s loan to you, but the voluntary grant of a security interest in your car to protect your brother’s loan to you, and the involuntary perfection of a judgment lien.
Malcolm Ruthven says
Thanks, Cathy! I get it.
Now a comment that isn’t for publication but is an observation that I see no way to “subscribe” to a blog article so I’m notified by email of any subsequent comments. I had to use google to find my comment here and see if you replied. Am I not seeing some feature here?