We have a lien on your name. Not your property, your name.
That’s what the county tax collector told my client, years after he got his bankruptcy discharge.
And that multi-thousand dollar lien claim threatened to sink the refinance of his house.
Eventually, we got the county straightened out without going back to bankruptcy court, and the lien claim withdrawn, but only after educating the county on liens and bankruptcy.
Here’s what was wrong with the county’s claim they had a lien on my client’s name.
Liens attach to assets
The initial nonsensical claim is that a lien attaches to someone’s name.
A name isn’t property. You can’t enforce a lien against a person’s name by seizing the name and selling it. That’s what a creditor would do with a valid lien that attaches to an asset.
Yet the tax collector claimed the lien was against the name of my client. Not a lien against his home, but a lien that entitled them to payment from a real estate refinance. (Not logical, but this was a tax collector.)
Perhaps the tax collector was trying to say that the lien wasn’t one for real property taxes on that particular house. Or she was saying that it wasn’t a consensual lien where the homeowner pledged his house as collateral for a loan.
But she definitely contended that the lien on my client’s name survived his bankruptcy.
Liens don’t snag post bankruptcy assets
The second bit of nonsense was the claim that the county had a lien in the house my client acquired after he filed bankruptcy.
The law on liens and a bankruptcy discharge is straightforward:
- Liens that attach to an asset owned on the day you file bankruptcy survive the discharge
- If the debt supported by the lien is not discharged, the lien attaches to property acquired after bankruptcy
- If the debt is discharged, there’s no lien on newly acquired stuff.
It’s the last proposition that saved the day for this client. The county’s tax claim was discharged in the bankruptcy. My client didn’t own a house when he filed. Therefore, the county got no lien on after-acquired property on account of a debt that was discharged.
Preventing post bankruptcy surprises
It’s not uncommon for creditors to pop up after bankruptcy with a claim inconsistent with the bankruptcy discharge. It happens because of ignorance, incompetence, and, occasionally, sheer greed.
Bankruptcy courts stand ready to enforce the rights that debtors get from bankruptcy. But that takes time.
The trouble comes when the creditor stands to upset a real estate transaction that has a deadline, and possible costs associated with missing that deadline. Like my client trying to refinance his house. Interest rates are going up. Miss the deadline and pay a higher rate for the life of the loan.If real estate is involved, start immediately to see what liens show in the public record. In California, where I practice, that means get a preliminary title report at the first opportunity.
Identify any liens that are unenforceable by reason of the bankruptcy discharge, or by reason of having been paid, died of old age or avoided in bankruptcy.
My attack on the county tax collector started with providing the creditor mailing list from the case, showing that the county had notice of the bankruptcy. I sent them a copy of the discharge order and the schedule that showed that my client didn’t own the house when he filed years ago.
Having given the county good notice of the bankruptcy, way back when, my client avoided more than $10,000 in tax claims.
And his name was his own.
More
Dealing with tax liens in bankruptcy
When creditors ignore your discharge
The IRS after your bankruptcy case
