Liens included in chapter 7 bankruptcies

Letter to “Ask Leon”

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 judgments against my former business. All of these judgments 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” judgments 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 judgments were included in our BK settlement but they are still on record as liens-is this legal? We cannot proceed w/ refinance in to our names until they are removed. Sorry if this is confusing. We are in California. Thank you for any help!

Leon Says…

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.