The One Secret That Matters

Is Timing, and it’s a HUGE Benefit to creditors if you mess it up. 

The value of your house that matters is the value of the house on the day of the petition was filed.1 If houses are going up in value fast, you may be out of luck by the time you file your case. If you cannot afford to file right away, sell something fast!

If you’re in a rapidly rising market, then between the day you filed your bankruptcy, and the day you file your motion to avoid the judgment lien, the value of the home could go up 2, 5 or 10%. If you don’t have solid evidence of the value on the day that you filed your case, you could have big problems.

Avoiding a Judgment Lien is a basic math problem, example: You own a house and it’s worth $295,000 and you owe $200,000. That’s $95,000 in equity. If you’re married and you reside in California you can protect $100,000 in equity in your home.

So you can protect $100,000 and your actual equity is $95,000 so it’s less than $100,000 so you can protect all of the $95,000. So the judgment gets removed or avoided completely.

So, let’s say that Hunt & Henriques have sued you for $20,000 on behalf of Capital One, gotten a judgment, then recorded an abstract of judgment with the County Recorder in the county where you own your home, so they have put a judgment lien on your home.

In the example, if you can prove the value of the house on the date of filing, then you’re good and the whole judgment gets avoided. 

However, in the example, if your motion gets filed 2 and half months later and the value has gone up by 5% which is a rounded $15,000, and if you cannot prove the value of the property on the filing date, then the amount that Capital One’s judgment would be reduced (stripped down) would only be $10,000 if the creditor decided to fight you. 

IF THE MARKET IS RISING OR IS A CLOSE CALL, YOU NEED AN APPRAISAL

Appraisals in Southern California can run you between $300 to $700 depending on the property. But in close cases, you have to spend it. Sorry.

Judgment lien avoidance is an extra service that costs you extra money. Most attorneys won’t file the motion for you until you have already paid for it, including me. I charge an affordable flat fee for these motions if they are unopposed and if opposed then be prepared to spend some real money. I will also allow you to pay for these motions after your case has already been filed.

But what if your attorney wants to be paid for the judgment lien avoidance prior to filing the case? 

What if that makes you not able to file for an extra month or two while you try to save up that extra amount of money? You may want to find another attorney who will be willing to wait for you to be able to pay for those motions a month later, or two. Of course not later than that or the case may close before the motion gets filed, and then you have another problem.

If the market is rising fast or you have a high amount of equity to begin with, you could be in real trouble if your attorney wants you to pay for the motion to avoid the judgment in addition to the initial bankruptcy fees prior to filing the case. 

A Couple of Housekeeping Secrets

First: If your judgment creditor is a bank, you must serve the motion on the bank’s CEO, CFO or some other Oh Oh Oh, at the bank’s corporate address.

• Check That Address Here.

Second: If the creditor is say, Walmart, or a Collection Agency such as Midland Funding, then of course you have to serve the attorneys who obtained judgment against you, but your creditor could have changed attorneys.  So, that’s not enough. You have to do a Business Search to find the company’s Agent for Service of Process.

• Business Search

Third: Serve the Banks and Agents for Service of Process via Certified Mail and include the code numbers for the certification right into the Proof of Service.

Fourth: Walk into the County Recorder’s Office and get copies of the Abstract of Judgment. The Abstract of Judgment which is another name for a Judgment Lien must be attached to the Motion to Avoid the Judgment Lien. For a list of County Recorder’s Offices, see below.

Title 11 United States Codes § 522(f) 

Allows you to strip a judgment lien off of house and home once you have filed a bankruptcy under specific circumstances. The analysis boils down to basic math.

(f) (1) Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property (aka real estate) to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is—

1. In re Chiu, 266 B.R. 743, 751 (9th Cir. BAP 2001) aff’d, 304 F.3d 905 (9th Cir. 2002) (stating “[i]t is well-established that the nature and extent of exemptions is determined as of the date that the bankruptcy petition is filed.”) (citing White v. Stump, 266 U.S. 310, 313 (1924))

Not sure if you’ve been sued?

But have you been delinquent on your debt payments for a while? Have you moved or had your house foreclosed?

You’d better Check the Courts and County Recorder’s Offices:

• Riverside Superior Court
• Orange County Superior Court 
• San Diego Superior Court
• San Bernardino Superior Court
• Los Angeles Superior Court
• San Francisco Superior Court
• Search for All Other Counties

Check the County Recorder’s Offices to see if a creditor has recorded a judgment lien against you:

• Riverside County Recorder
• Orange County Recorder (Click SEARCH top left)
• San Diego County Recorder
• San Bernardino County Recorder
• Search All Other Counties

  Image Credit Ginasanders / 123RF Stock Photo