Normally a second mortgage lien can not be removed in a chapter 7 bankruptcy. However, if the creditor has put a “judgment” lien on the home instead of a “mortgage” lien; it can be done. We recently had a debtor who is buying a home valued at $250,000, due to the first mortgage, there is no equity available. We made a Motion to Remove Judicial Lien based on this fact. The creditor made no objection in the proper time allotted and the Motion was granted. The lien was for $59,000. Because a creditor made a mistake, it lost out on recovering money loaned. Perhaps not surprising to realize, creditors make mistakes like this all the time. Simply researching your client’s case and reviewing any liens involved could save your client a vast amount of money.
In another instance, we had a debtor who filed a chapter 7 bankruptcy and discovered that a creditor had put a lien on the debtor’s property for an above ground pool. A pool is collateral in itself; it is never acceptable to place a lien on someone’s property for a secured item. We thought at first to file an adversary proceeding against this creditor until realizing that the client had a second mortgage on his home that was wholly unsecured by lack of equity in the property. By converting this client to a chapter 13 case, we can remove the second mortgage and the lien for the pool.
Many times, some analytical thought regarding a client’s circumstances and petition can lead to money saving solutions such as these. It is well worth spending extra time on a case to insure a debtor can indeed obtain a fresh start by filing bankruptcy.
Jacqueline S. Edington