bjbj My name is Ron Drescher. I’m an attorney
practicing in bankruptcy and commercial litigation. I’m licensed in Maryland, Virginia, Pennsylvania,
and Delaware, and today I want to talk to you about lien stripping to preserve an exemption.
As I’ve talked about before, an exemption is your ability to keep stuff that you own
even though you’re going to get a discharge. Sometimes you get sued, your creditors get
a judgment against you, and those judgments become liens against your property, usually
your real estate. In most states, you file a lawsuit and you get a judgment against somebody,
that judgment becomes a lien against their real estate in the county, very common. Now,
in this day and age, most people don’t have much equity in their homes, but they’re hoping
that someday they will. If you file bankruptcy and you exempt any part of your property,
you want to strip off those judgment liens and you are allowed to do that in bankruptcy.
It’s something called lien avoidance because the judgment lien impairs an exemption. Let’s
say you’ve got a piece of property worth $200,000.00 and let’s say your mortgage is $210,000.00,
so you’re $10,000.00 under water. You’re hoping you’re going to pay down that mortgage someday
or your property will appreciate to more than the mortgage. Otherwise, really, you’re just
paying rent. Now, let’s say you got sued and your creditor gets a judgment against you
for $50,000.00. Well, that $50,000.00 is a lien that is junior in priority to the mortgage.
So you’ve got a $200,000.00 piece of property. You’ve got a $210,000.00 mortgage and a $50,000.00
judgment. In bankruptcy, what I would do is I would take $1.00 worth of exemptions and
apply it to that house. Then I would file a motion to avoid that judgment lien because
it impairs that $1.00 exemption. It seems crazy, it seems absurd, and it seems abusive,
but it’s not. You are entitled to that $1.00 exemption and you will succeed in stripping
off that lien. Lien avoidance is really critical. Sometimes your lawyer may forget or you may
forget to tell your lawyer that you have that judgment and you may go through, get your
discharge. Your bankruptcy case is closed. Years later, really, years later, you want
to sell or refinance your home and you discover that you have that judgment lien. You won’t
be able to sell or refinance. Then what you have to do is go back into the bankruptcy
court. You have to ask the court to reopen your bankruptcy case so that you can claim
the exemption and avoid the lien. If it takes too long, the bankruptcy court may not let
you do that because they say it’s unfair. Too much time has passed. You can’t recreate
what the situation was at the time your bankruptcy case was closed. If that happens, then you
have to negotiate with that creditor and it may not turn out the way you like it. That’s
why it’s very important to do your lien avoidance motions right at the start in your bankruptcy
case. My name is Ron Drescher. I am an attorney. I do bankruptcy and commercial litigation,
and if you have any questions regarding any of this, I’d love to hear from you. SpeakWrite
www.speak-write.com Job Number: 12102-003 Custom Filename: lien stripping Date: 04/11/2012
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