Expert: Los Angeles Bankruptcy Lawyer Leon D. Bayer - 9/20/2006

Question

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Followup To

Question -
We filed for CH 7 in April 2005, both person & included a small business that I owned. It was discharged in July 2005. (We paid a settlement of $32,000 to debtors because we had too much equity in our home.) Included in this debt were civil judgements against my former business. All of these judgements were to be discharged along with the rest of the BK. We are now trying to refinance our house and found that three of these "included" judgements placed liens against the deed to our home approx 2 months before we filed for BK. Our mortgage has been carried by my mother in law since 2004 and the deed wasn't even in our name until the day before we filed for BK. (We didn't know that you could get in trouble for letting someone in your family take over your deed  for a year prior to filing BK, so our attorney made sure that the deed was back in our name when we filed.) My question is, these judgements were included in our BK settlement but they are still on record as liens-is this legal?  We cannot proceeed w/ refinance in to our names until they are removed. Sorry if this is confusing. We are in California. Thank you for any help!

Answer -
Have you read the "settlement" carefully? From what you have said, I'm guessing that the settlement was only between you and the bankruptcy trustee for the purpose of resolving your non exempt home equity, and probably not binding on any other party for any other purpose. But without reading it for myself, I have no way to tell.

You had an attorney, and I assume that your lawyer represented you in this settlement? What does your lawyer say? If you no longer have legal representation or if you feel you need a second opinion, then you really should retain another attorney immediately to help you with this.  This kind of problem is beyond the scope of what I can tackle in this advice column, because I don't have any of the relevant documents.

Thank you for your reply. The settlement was to pay off a portion of our debt plus the trustees fees. Because we owed over $85,000 in debts(these liens included) the remaining monies were to be disbursed amongst the debtors who filed a claim. One of the reasons we filed for BK was because of the civil judgements. I have contacted our attorney but have not rec'd a call back yet. Can they attach the house even though it wasn't in our name (mortgage or title)until the day we filed BK? The mortgage is still being carried by my mother in law, but we are on the title now.  

Answer
I really am sorry that you are in this mess. At the same instant when you obtained legal title, any valid outstanding judgement liens against you automatically attached to your property.

I think one legitimate question is to determine how the amount of the settlement was arrived at. Was that amount based on your non exempt equity minus the amount of those liens? If those liens were not taken into account, would there have been any non exempt equity after considering the amount of those liens?

Again, without the benefit of seeing relevant documents for myself, there is nothing else that I can add. You do need the advice of capable legal counsel who will have the benefit of reviewing your file and being able to have a live discussion with you.