So you are thinking about filing for bankruptcy, but worried because a creditor has already gone to court to get an attachment against your home (or some other piece of property)?
Usually, this does not present much of a problem. Bankruptcy lawyers call these attachments “judicial liens” and by filing a bankruptcy case for you, they seek to “avoid” them, which is their lingo for “get rid of them.” Usually this requires, in addition to the regular bankruptcy paperwork, filing a special motion with the judge and sometimes having a hearing concerning the lien.
But what if you have no equity in the property, perhaps because of the crash in real estate prices? In that case, you (or your attorney) might neglect to claim a homestead exemption, making the reasonable assumption that there is nothing really to exempt.
So what happens to the lien in that case? Interestingly enough, two Massachusetts bankruptcy judges in different parts of the state have come up with opposite answers to the same question. Judge Joel B. Rosenthal, who usually hears cases in the Worcester bankruptcy court, would get rid of the lien anyway. Last September, in the Morais case, he expressed the opinion that the Bankruptcy Code does not require any claim of exemption in order to strip a judicial lien.
Massachusetts Bankruptcy judge Joan N. Feeney, who usually hears her cases in the Boston branch of the court, has come to the opposite conclusion, however. As shown in the November decision In re Church, she requires that debtors not only have an interest in the property that can be declared exempt, but insists that the exemption be specifically decalred on Schedule C of your bankruptcy petition, or else the lien will not be removed.
While much of the Merrimack Valley, including Lawrence, Lowell, Methuen, Haverhill, and the Andovers, have their cases heard in Worcester, it is probably prudent for debtors to follow Judge Feeney’s policy anyway, and carefully declare an exemption in any real estate that has liens attached, prefereably when they first file their cases.
By Doug Beaton