Removal of Liens – 522 (F) – Motion to Avoid Liens in Bankruptcy
One of the primary goals of the United States Bankruptcy Code is to allow Debtors to get a fresh start and return to good financial health. To that end, Congress recognized the need for Debtors to maintain certain basic assets that allow them to function comfortably. Exemptions were established under the United States Bankruptcy Code that allow Debtors to retain the basics, housing, home furnishings, personal effects, tools of the trade, etc.
US Code §522 (f) empowers Debtors to remove lawsuits and certain ties from the Debtor’s real and personal property title, thereby further protecting certain basic assets deemed necessary for the Debtor to return to good financial health.
HOME PLACE EXEMPTION
To the extent that Debtors have equity in their homes, that equity is protected from creditor claims up to certain limitations. This is known as the Homestead Waiver.
The Federal Homestead exemption is limited to $ 23,676.00. However, debtors can choose to use the home state exemptions instead of the federal exemptions. This decision must be carefully evaluated because it is sometimes more advantageous for Debtors to choose federal exemptions rather than state exemptions to protect other important debtor assets. This requires careful analysis on the part of your bankruptcy attorney.
New York State homestead exemptions are set forth in Debtors and Creditors Law §282. Under the New York legal scheme, the homestead exemptions are as follows: $ 165,550 if the property is in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, or Putnam counties; $ 137,950 if the property is in Dutchess, Albany, Columbia, Orange, Saratoga, or Ulster counties; $ 82,775 if the property is in any other county in the state. The Homestead Exemption also covers condominiums, cooperative apartments, and mobile homes.
New York State exemptions also allow married couples to double their homestead exemption, allowing each spouse to claim the full exemption amount for each in the property. Therefore, a married couple can exempt up to $ 331,100, $ 275,900, or $ 165,550, depending on the region of the state in which the debtor resides.
HOW TO REMOVE JUDGMENT LINKS FROM THE DEBTOR’S HOME WAIVER
Debtors may avoid judicial ties, that is, judgments, to the extent that such ties are foreign to the Debtor’s homestead exemption. Debtors must file a §522 (f) motion to take advantage of this opportunity. The procedure requires the Debtor to establish that there is no unprotected equity value in his home in which the judgment creditor can ensure their bond. An appraisal of the Debtor’s home must be filed with the Court and the Debtor must provide the Court with proof of any mortgage on the home. Therefore, the debtor must provide a recent appraisal of his property and copies of the mortgages presented that establish valid mortgage ties on the property.
The Court will determine if there is equity to secure the judgment bonds on the property. If there is no principal to secure the bonds, the Bankruptcy Court will order that the judgment bonds be stripped of title and those judgment creditors will be treated as general unsecured creditors.
Note: This procedure is not available for IRS tax links or state tax links. Only the bonds of the judgment creditors can be removed from the Debtor’s title deed.
REMOVAL OF PERSONAL PROPERTY LINKS
The Bankruptcy Code also allows Debtors to strip debtors of non-possessory or monetary guarantees of purchase on any home furnishings, household items, clothing, appliances, books, animals, crops, musical instruments or jewelry that are kept primarily for personal, family or personal use. domestic use of the debtor or dependent of the debtor; implements, books or professional tools of the debtor’s trade or the trade of a dependent of the debtor; health aids prescribed by a professional for the debtor or a dependent of the debtor. (See US Code 11 §522 (f) (B).
This allows Debtors to eliminate all collateral covering protected or exempt personal property assets. Often times, these types of ties arise when the debtor obtains a loan from a finance company and the lender places a lien on all of the debtor’s assets. In this case, the loan is a non-cash security interest. The debtor cannot remove the “buy-money ties” when the debtor purchased furniture, appliances, or tools of the trade and the seller financed the sale.
The Bankruptcy Code provides the Debtor with the unique ability to protect the assets necessary to successfully reorganize its affairs. The Bankruptcy Code protects the basic needs of the Debtor, including the equity in their property and the personal property that the Debtor needs to start over. To that end, the Debtor is allowed to remove the bonds that encumber the Debtor’s protected equity in his exempt property and personal property. To successfully assist the Debtor in reorganizing his financial affairs, the Debtor’s assets must be carefully evaluated and the Debtor’s bankruptcy attorney must help the Debtor remove ties and liens that harm the Debtor’s exempt assets.