Here’s A Way To Rescue Your Client’s Exemptions

Do you know which ignored prefiling issue  triggers the most reopened bankruptcy cases?

I’ve got no data but my money’s on avoidable judicial liens.

We as bankruptcy attorneys have gotten so caught up in avoiding consensual mortgages where they are totally unsecured that we forget to look for the easy stuff.  Stuff that is available to our clients in Chapter 7 and Chapter 13.

Section 522(f) essentially allows bankruptcy attorneys to salvage exemptions that appear to have been eaten up by judicial liens.

Relying on your client to point out judicial liens on their assets ranks second in risky manoevres only to asking your client about critical tax filing dates.

When your client isn’t opening his mail, and when process servers don’t bother to serve anything, it’s no wonder clients can’t tell you if their are judicial liens on their assets.

Unless you are unusually diligent pre filing,  sooner or later you will be getting the anguished call from a client whose property is in escrow and on the eve of closing, a pre bankruptcy judicial lien is discovered.

The good news is that a bankruptcy case can be reopened to avoid a lien that impaired an exemption.  The bad news is that the process takes time, and time may be the enemy of the transaction that’s pending.  (This of course assumes that there will be conventional sales of real estate in the future that might yield net proceeds to our clients).

Interested In Learning More?

In my downloadable audio program, Avoiding Liens That Impair Exemptions, we talk about which liens can be avoided in Chapter 7 as well as in Chapter 13. You’ll learn about how to value collateral, deal with the interests of non-debtors and calculate how much of the lien is void. Get instant delivery of the audio program as well as all of the materials and PDF versions of the slides, by clicking the Add To Cart button.

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Image courtesy of sparklemotion0.

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  1. Hi Cathy.  I really enjoy your blog.  Thanks for posting your insights.  They always seem very timely.

    This week I have come across this exact issue twice.  Clients who have come to me after their cases were completed by other attorneys and now they have judgment liens that were never avoided.   What makes these cases different is that they are Chapter 13s.  In my jurisdiction we do lien avoidance by motion.   Can I reopen the case and file a lien avoidance motion now?   Would the confirmation order need to be amended to reflect the treatment of this lien creditor?  

    • CathyMoran says:

      So much of 13 is local, local, local. Here, I would have no difficulty reopening to file the motion. If the point is that the lien is avoided, it’s hard to see why the plan would require amendment.