A money judgment is a court ruling that makes an individual debtor liable for the payment of a debt. A judgment is effective as a lien against all of the judgment debtor’s real property in the county of the judgment or any other county where the judgment has been transcribed into the official records. This judgment lien or judicial lien is effective both with respect to property owned at the time of the judgment, as well as property acquired after the judgment. A bankruptcy discharge will void the future application of a judgment, preventing it from attaching to property acquired after bankruptcy. However, a discharge does not itself get rid of an existing judgment lien. In the state of New York, this type of lien is enforceable for a period of ten years and allows the creditor to be paid at the time of the sale of the real estate.
When an individual files a Petition for Bankruptcy, they are entitled to keep certain items of property known as exemptions. Under the terms of the Federal Bankruptcy Code, 11 U.S.C. § 522(f), a debtor may avoid the attachment of a judicial lien to his interest in property to the extent that the lien impairs the debtor’s homestead exemption.
Bankruptcy Code Section 522(f)(2)(A) provides that a lien is considered to be impairing an exemption to the extent that the sum of:
(i) the lien;
(ii) all other liens on the property; and
(iii) the amount of the exemption that the debtor could claim if there were no liens on the property; exceeds the value that the debtor’s interest in the property would have in the absence of any liens.
The purpose of Section 522(f) is to protect a debtor’s exemption, his discharge, and his fresh start by permitting him to avoid a judicial lien on any property to the extent that the property could have been exempt in the absence of the lien. See “In re Gary Condon and Colleen Quinn-Condon” Bankr. E.D.N.Y case number 09-77168-478. It should also be noted that the determination of the value of the debtor’s interest in property is a function of New York law as the property is located in that state. Butner v. United States,  440 U.S. 48, 99 S.Ct. 914 (1979).
New York State Protection
In addition to the above referenced exemptions set forth under the terms of the Federal Bankruptcy Code, a debtor is afforded protection under New York law as well. In New York, the amount of the homestead exemption varies by county, from $75,000.00 to $150,000.00 based upon the location of the property, and the exemption amount is doubled for married couples. The New York Civil Practice Law and Rules, Section 5206, relates to the homestead exemption in the state of New York and provides, in part, as follows:
“(a)?Exemption of homestead. ?Property of one of the following types, not exceeding one hundred fifty thousand dollars for the counties of Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam; ?one hundred twenty-five thousand dollars for the counties of Dutchess, Albany, Columbia, Orange, Saratoga and Ulster; ?and seventy-five thousand dollars for the remaining counties of the state 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:
1.?a lot of land with a dwelling thereon,
2.?shares of stock in a cooperative apartment corporation,
3.?units of a condominium apartment, or
4.?a mobile home.
But no exempt homestead shall be exempt from taxation or from sale for non-payment of taxes or assessments.”
The statute further provides:
“(d)?Exemption of homestead exceeding one hundred fifty thousand dollars in value for the counties of Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam; ?one hundred twenty-five thousand dollars for the counties of Dutchess, Albany, Columbia, Orange, Saratoga and Ulster; ?and seventy-five thousand dollars for the remaining counties of the state. ?The exemption of a homestead is not void because the value of the property exceeds one hundred fifty thousand dollars for the counties of Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam;?one hundred twenty-five thousand dollars for the counties of Dutchess, Albany, Columbia, Orange, Saratoga and Ulster;?and seventy-five thousand dollars for the remaining counties of the state but the lien of a judgment attaches to the surplus.”
Motion to Remove a Judicial Lien
In those instances, where a judicial lien is being attached to the property of a debtor, in an amount sufficient to nullify the homestead exemption, the debtor has the option of filing a Motion in bankruptcy court to remove the judicial lien. In some cases, a motion can be made to remove the judicial lien in bankruptcy court pursuant to the terms of 11 U.S.C. § 522(f)(i)(A) which provides, in part, as follows:
“Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is –
a judicial lien, other than a judicial lien that secures a debt of a kind that is specified in section 523(a)(5); or
(B) a nonpossessory, nonpurchase-money security interest in any-
(i) household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, or jewelry that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor;
(ii) implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor; or
(iii) professionally prescribed health aids for the debtor or a dependent of the debtor.”
In the recent case of “In re Deborah Shea and Daniel Shae,” case number 533 B.R. 358 (2015), the U.S. Bankruptcy Court of Eastern District New York  addressed this exact type of motion, to avoid a judicial lien. The Court’s July 2, 2015, decision provides as follows:
“This Court has held on numerous occasions that, in order for a debtor to avoid a judicial lien under § 522(f), the debtor must (1) actually claim a homestead exemption in the property in an amount certain, (2) correctly state the amount actually claimed on Schedule C in the motion, and (3) claim a homestead exemption sufficient to exempt all equity in the property net of non- avoidable liens. See e.g. In re Schneider, 2013 WL 5979756, at *11-13 (Bankr. E.D.N.Y. Nov. 8, 2013).”
In the Shea case, the debtor’s motion was granted and the judicial lien was avoided as a lien of record against their residence.
Discovering a Lien After New York Bankruptcy
In some instances, an individual determines the existence of a lien after their bankruptcy case has concluded, often when they are ready to sell a home or to refinance. In that instance it may be necessary to reopen the original bankruptcy case and to ask the court to avoid the lien or liens that impair the exemption. It should be noted, however, that one way to avoid this type of dilemma may be to check the public record before a bankruptcy case is filed.
Bankruptcy laws, both on the state and federal levels, can be complicated and difficult to apply to an individual case. In addition to understanding and interpreting bankruptcy laws, it is also necessary to have a greater Long Island and New York area bankruptcy attorney who can determine the need to check public records, to decide if a Motion to Avoid Lien is necessary and to otherwise protect your interests. Call the office of Ronald P. Weiss today at (631) 296-0361 in order to discuss the specifics of your financial situation and possible bankruptcy solutions.