Successfully discharging a bankruptcy can bring a tremendous amount of relief to consumers who were previously at their wits end. So imagine the surprise experienced by someone who successfully complete bankruptcy only to find out a few months later that there is a property lien still outstanding against the family home.
What you need to know about properly liens is that they can only be removed by a court or the person/organization that files them. Even when debts are discharged through personal bankruptcy, the liens are left intact unless a separate action removes them. Therefore, it is wise for any consumer currently going through bankruptcy to check to see whether any property liens exist.
Removing a Judgment Lien
There are two kinds of property liens we typically see post-bankruptcy, beginning with a judgment lien. What is a judgment lien? It is a lien placed on property as a result of a court order. It would be created in the event that a judge determined, as the result of a lawsuit, that a creditor had the right to place a property lien in order to ensure payment of a debt. Such judgments are common in civil lawsuits.
Because the lien is the result of a lawsuit, it is not automatically removed from the defendant’s property title simply because the debt itself was discharged through bankruptcy. The only way to remove that lien is to petition the court for relief. The fastest and easiest way to do this is to petition the bankruptcy court while a bankruptcy proceeding is still ongoing. In a post-bankruptcy scenario, the process is more complicated.
To discharge a lien after a completed bankruptcy, the plaintiff would have to reopen his or her bankruptcy case before filing a motion to avoid the lien. It is then up to the court to decide on whether to accept or reject the motion.
Removing a Mechanics Lien
The other kind of post-bankruptcy lien we see quite often is the mechanics lien. This lien is one placed on a property by a contractor in order to ensure payment for work done. For example, a remodeling contractor who agrees to accept installment payments on a kitchen and bath remodeling project may file a mechanics lien just in case the customer defaults.
Contractors do not need court approval to file mechanics liens. In fact, takes very little to place a mechanics lien on a property if you are a contractor. The other side of this is that mechanics liens are also considerably easier to have removed post-bankruptcy.
At any rate, removing a mechanics lien is relatively straightforward if it has reached its legal time limit. In other words, a contractor only has a limited amount of time to exercise his/her rights under a mechanics lien if the customer defaults. Once that deadline passes, the contractor is supposed to remove the lien him/herself. If he/she doesn’t, the homeowner can file a motion in court. Most of the time these motions are not challenged by contractors and the liens are removed in short order.
If the time limit has not expired, the property owner may have to file a suit under the assumption that the mechanics lien is invalid. Again, contractors are unlikely to challenge such a motion unless there is a significant amount of money in play.
The typical mechanics lien is easy to get rid of post-bankruptcy. Please contact our offices if you have any questions about a post-bankruptcy lien on your property. We would be happy to represent you in court if necessary.