I met with a couple recently who had completed a Chapter 13 in 2015. They thought that all their past financial worries were behind them until they tried to refinance their house. That’s when they discovered three judgment liens that went back several years, long before they filed. The title company that found these judgments told them that their Chapter 13 attorney could have resolved this just “by filing a piece of paper.” A call to the attorney was met with “there’s nothing we can do.”
I reviewed their file and had to tell them that, despite what the title company said the attorney was correct. There was nothing he could have done. The reason is that they had too much equity in their house. Judgment liens can be avoided in bankruptcy but only to the extent they impair an exemption. In this case there was enough value in the house to cover the mortgage, their exemption and all but $1,800 of the $21,000 in judgments.
The moral of this story is, don’t believe everything you hear from non-lawyers. The title company knew just enough to be dangerous, but not enough to be right.