This is technical blog post that is going to cover an obscure, but every important situation that some bankruptcy filers find themselves in after bankruptcy.

Let’s say that you were sued prior to bankruptcy and the creditor recorded their judgement in your county of residence. At the time the judgement was recorded, you did not own any houses or land. Under normal circumstances, if you were to purchase some real property after the date of the judgement, the judgement would then automatically attach to your new house. If you were ever to sell the house, you would have to satisfy the judgement in order to remove the lien. This is well settled law in California.

Instead, imagine that you declare bankruptcy and discharge all of your debts in between the time the judgement is recorded and when you purchase your new house. All of your debts were discharged in your Chapter 7 bankruptcy, including the judgement. So far, so good.

What some people are finding is that when they go to sell their house, title companies are reporting that the previously-discharged judgement is showing up as a lien on their house. This is very unexpected because the person thought that all of their debts — judgement included — were discharged in their previous bankruptcy.

The question is this: is the lien valid, or is enforcement of the lien against the debtor’s property a violation of the bankruptcy discharge injunction?

I have had to deal with this exact scenario a number of times in my office. It is my legal interpretation that trying to enforce the lien is a violation of the discharge inunction and is prohibited by law. Each time the issue has come up, I have been able to persuade the judgement creditor to file a lien release. Luckily for my clients, we have not had to resort to litigation to resolve this issue.

Briefly, the legal reasoning is this: a recorded judgement lien can never be perfected against after-acquired property because the personal liability for the underlying judgement and the existence of the property must occur simultaneously. The affixing of a lien against the debtor’s property is based upon the existence of a debt as a personal liability against the debtor. In these cases, there is no more personal liability against the debtor because the debt was extinguished in the prior bankruptcy. Therefore, the judgement lien cannot attach to after-acquired property assuming the judgement was properly discharged in a prior bankruptcy proceeding.

Not all professional collection firms understand this and will still attempt to enforce a judgement lien against after-acquired property. They often do so because of time pressures: if you’re trying to close on the sale of your house or a mortgage re-finance, you don’t often have much time to wrestle with the creditor over these intricate principles of law.

If this is happening to you, please contact my office. I am available to help with post-discharge debt collection. My office phone number is (916) 333-2222.

If you are considering declaring bankruptcy in Sacramento, chances are you are at least somewhat concerned with keeping your assets safe. Most people are primarily worried about their houses or cars, but what about your bank accounts?

Unfortunately banks can and will freeze bankruptcy filers accounts. Wells Fargo in particular has a very aggressive policy. The banking goliath has made it very well known in the bankruptcy community that when it comes to bankruptcy, their clients are their least concern. You may think that this won’t happen to you, but the policy is nationwide. The bank uses a program to cross reference each day’s bankruptcy filers with their account holders and subsequently freeze any account containing over $5,000. Even accounts with less money in them are at risk.

Once the account is frozen, Wells Fargo will only release the funds at the bankruptcy trustee’s request. Generally speaking, most trustees will want to wait at least until the Meeting of Creditors has concluded before considering such request. Even if the trustee is sympathetic, debtors will still be unable to access their accounts for at least one month, if not longer. This can be devastating when your bills come due, especially if you are already struggling to stay current on mortgage and car payments, not to mention everyday expenses like gas and groceries.

Some debtors have tried fighting against Wells Fargo’s policy in court. However, the Ninth Circuit Court of Appeals has consistently favored Wells Fargo and have continued to validate the bank’s hold on any debtor’s funds. While I do not agree with this policy, it is the law here in California.

As a Sacramento Bankruptcy Attorney, I strongly recommend that you avoid Wells Fargo altogether. Before filing bankruptcy, consider closing out any Wells Fargo accounts and switching to a different bank. Generally, small local banks and credit unions are much more lenient towards bankruptcy filers and consumers in general. Remember, Wells Fargo and Bankruptcy aren’t a good mix.