SECURED DEBTS
Spending the sales proceeds without
the lender’s permission may be a form
of fraud creating a debt which is not
dischargeable under 11 U.S. C. 523.
Involuntary liens
Judicial liens
Judgment liens are created by law, in
favor of the winning party in a lawsuit.
Usually a judgment does not, in and
of itself, give the judgment creditor a
lien. The creditor must usually take an
addition step of filing or recording the
judgment with the designated agency to
create a lien on the judgment debtor’s
property.
In California, recording an abstract of
judgment with the County Recorder
gives the judgment creditor a lien on all
the debtor’s real estate in the county.
Recording notice of the judgment
with the Secretary of State gives the
judgment creditor a lien on all the
debtor’s personal property.
Check the laws of your state to
determine how judgment liens are
perfected. Get a report of liens on file
with the secretary of state to know what
liens are perfected, and the seniority of
each lien.
In analyzing a debtor’s situation for
bankruptcy planning, it is important
to know if judgment liens have been
perfected, since secured debts are
totaled separately from unsecured
debts in calculating the debtor’s
eligibility for Chapter 13.
impair exemptions; in Chapter 13 they
can be stripped down to the value of
the assets to which the lien attaches.
Tax liens
The recordation of a tax lien perfects
a lien on all of the taxpayer’s property,
real and personal. It may attach even
to retirement savings and 401(k) plans
that are beyond the reach of other
creditors.
It is a statutory lien, so cannot be
avoided in bankruptcy like judicial liens
that impair an exemption.
Tax liens can be stripped off in Chapter
13 if there is no equity in the property
for the lien to attach to.
Judgment liens may be avoided if they
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National Association of Consumer Bankruptcy Attorneys
Summer 2017
CONSUMER BANKRUPTCY JOURNAL
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