Depending on the homestead exemption applicable in your state, the Bankruptcy Code allows a Debtor to void and nullify certain judicial liens against a residence if the lien interferes with the homestead exemption. While it is possible to reopen a closed case to avoid a lien, do not wait too long to do so or it may be too late. Even though the debt is discharged by the bankruptcy case, the lien will survive the case unless it is avoided under the Bankruptcy Code in the case.
It is a simple process to file a motion in a bankruptcy case to lift the lien on the home even if there is no equity in the home to cover the exemption. The lien must be a judicial lien, that is, a lien created by the entry of a judgment in court. Not all liens on a home may be judicial liens.Generally, the motion to avoid the lien is filed in the case while it is open, but court decisions are full of examples of cases being reopened for the sole purpose of avoiding an old lien.
Be careful not to wait too long. If the creditor holding the lien has taken some action to enforce that lien, then the Bankruptcy Court may choose not to allow the avoidance. This is the principle called “laches”. The principle provides that a party who has “slept on its rights” is no longer entitled to its original defense as a result of this delay.
As with many concepts in the law, this is not a defined period of time. So a lien that has existed for 15 years without any form of enforcement might still be avoidable, but a lien that has only been filed for 5 years might be fully enforceable if the creditor had taken aggressive steps to enforce the lien and the Debtor ignored or failed to defend the claim.
In Connecticut, there are several court decisions illuminating these principles going back as far as 1993, mostly decided by Judge Krechevsky who studied this issue in depth..
Last modified: May 28, 2013