Rochester Bankruptcy and Debt Relief

Whenever there are judgments against real property, owned by the debtor who files Chapter 7 Bankruptcy, those judgments, under appropriate circumstances, can be removed by filing 522(f) motion.  The judgment can be removed provided that the debtor’s equity in the property does not exceed $50,000.00 per single filer, or $100,000 per married couple.  The $50,000.00, otherwise known as a homestead exemption, comes from the present version of New York’s Debtor and Creditor Law.  Prior to August 30, 2005, New York’s homestead exemption was $10,000.00 per single filer, or $20,000.00 per married couple.

One issue that was not conclusively resolved in Western New York bankruptcy court was what happened in a situation where the creditor’s judgment was perfected prior to August 30, 2005.  If the judgment was perfected prior to the effective date of the increase in the homestead exemption, would the new homestead exemption or old homestead exemption would apply if the debtor filed Chapter 7 Bankruptcy?

According to the United States Bankruptcy Court Judge Bucki in Buffalo, the applicable homestead exemption amount is the new $50,000.00.  In Re Calloway, Judge Bucki held that once the New York statute was amended, the homestead exemption amount became $50,000.00, and it would apply regardless of the date it was perfected.  Judge Bucki wrote that to hold otherwise, would disregard the meaning of the statute and its interpretation under New York law.  Specifically, he wrote that “C.P.L.R. § 5206 was immediately changed to provide that a homestead “not exceeding fifty thousand dollars in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof.””

Pursuant to the Debtor and Creditor Law § 282, the debtor has exercised her right to exempt her property from the bankruptcy estate.  Therefore, pursuant to 11 U.S.C. §522(f), the debtor may now avoid judgment liens that impair a homestead not exceeding $50,000 in value.

Therefore, debtor’s bankruptcy attorney does not need to be concerned with the date when the judgment was perfected.  As with most §522(f) motions, the biggest concern that a lawyer would have is the value of the property and whether debtor’s equity in it does not exceed the homestead exemption.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

If a creditor obtains a judgment against a debtor, that judgment, if filed, becomes a lien against any real property owned by the debtor.  Any such judgment lien against real property can be removed from the property, if the lien impairs an exemption you claim in your bankruptcy.  In New York State, you can only remove a judgment lien against your personal residence.  Debtor’s bankruptcy attorney usually files a motion pursuant to section 522(f) of the Bankruptcy Code.  A typical motion includes a number of attachments such as a copy of the deed, mortgage, current mortgage statement, a recent appraisal of the property, and copies of the judgment filed in the local County Clerk’s office.

Typically,  the debtor is faced with the following situation.  The debtor owns a home with the total equity of less that New York’s homestead exemption, which is currently $50,000 for a single debtor and $100,000 for a married couple filing jointly.   What a $50,000 homestead exemption means is that the debtor can have up to $50,000 of equity in the residence ($100,000 for a married couple) and your home will not be taken or threatened by the bankruptcy trustee or other creditors.   If there are judgments against the debtor, they are viewed as impairing debtor’s exemption in the property and gives the debtor the right to remove them.

If you do not own a residence when you file your bankruptcy, you cannot set aside the judgment in the County Clerk’s office, but the underlying debts are discharged.  This may become a a problem if you purchase (or inherit) real property after your bankruptcy.  In that situation, even though there is no actual lien against the newly acquired property, it may appear that there is to someone searching the Clerk’s office.  This is because they will see a judgment against you, and they will see that you own the property.  Without knowing about the intervening bankruptcy and the discharge of the debt that underlies the judgment, they could draw the conclusion that the judgment was in fact a lien against the property.

The problem often surfaces if there comes a time that you want to borrow against, or refinance the property.  Most lenders are sophisticated enough to recognize that any pre-bankruptcy judgments are usually discharged and a typical judgment search, or a title search, in Monroe County will include a check of the Bankruptcy Court’s records.  It is also the reason to keep a copy of your discharge after the bankruptcy so that the lender can have easy verification that the bankruptcy resulted in a discharge.

If you are dealing with debt problems in Rochester, New York; Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.