Expert: Los Angeles Bankruptcy Lawyer Leon D. Bayer - 2/10/2012

Question
I am trying to purchase a home on a short sale. The owner has agreed to work with me exclusively. I am trying to do most of this myself. The first hurdle is how to remove 2 liens that are recorded on the property. The home has been vacant for more than 2 years and there have been no payments made on the home loan. The home owner filed for Bankruptcy a couple of years ago. The 2 liens I am referring to were discharged in the bankruptcy proceedings. How do I get these 2 liens removed from the Title report?

Answer
Dear Gary,

I see this sort of thing alot. An experienced bankruptcy attorney will know exactly what to do.

The bankruptcy court will usually permit the debtor to reopen a closed case so he or she can seek relief that could have been sought (but perhaps was overlooked) during the bankruptcy. Avoiding judgment liens is a good example of what can be requested if the court agrees to reopen a case.

A situation like this requires a two step process, First, a motion has to be made to reopen the case. Second, if the court reopens the case, a motion has to be made to avoid the judgment liens. To avoid the liens, the debtor must establish that there was no equity in the property to cover any part of the liens at the time that the bankruptcy was filed, and that the debt is entitled to claim an "exemption" on the property.

In your situation, I would not be surprised if the debtor failed to claim an exemption on the property. A claim of exemption is usually necessary as an element of the process to avoid a judgment lien in bankruptcy. If there are problems with the debtor's original bankruptcy paperwork, it may be possible to get them cleaned up by filing amended Bankruptcy Schedules as soon as the case is reopened. Again, an experienced bankruptcy attorney will know exactly what to do.

Sometimes we hear from people that filed bankruptcy in the past–or we get a call from their real estate brokers–that have to deal with liens on their home that shouldn’t be there after a bankruptcy case. These “surprise liens” can screw up a loan refinance or a sale of the home and they might need to be dealt with by going back into the old bankruptcy case.

For example, during a bankruptcy case a debtor might not have been aware of a judgment lien and only learned about the lien years later when he or she is trying to refinance or sell a home. In that case the debtor might want to reopen the closed case and then file a motion seeking to avoid the lien.

We’ve even seen situations where creditors filed liens on property after a bankruptcy case; and these liens interfere with an escrow closing. This could happen if a creditor claims they did not receive notice of the bankruptcy filing; or if the creditor simply ignored the bankruptcy to engage in improper debt collection activity. In these situations, it may not always be necessary to re-open a closed bankruptcy case, but intervention by an experienced bankruptcy lawyer could make the difference in getting that refinance or sale closed promptly.

This isn’t the first time I’ve written on this topic and it probably won’t be the last since real estate title problems and past bankruptcy cases often overlap.

If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com  and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/