Removing Judgment Liens From Homestead

I often hear complaints from bankruptcy clients who find that judgment liens interfere with the sale or refinancing of their homestead property after their bankruptcy even though the listed the lien creditor on their bankruptcy petition and claimed their homestead as exempt property. A civil judgment becomes a lien on all real property owned by the debtor in any county where a certified copy of the judgment is recorded. The recorder of deeds does not know whether a particular property is the homestead of the debtor. Often, the debtor must take affirmative steps to remove the lien from homestead if the debtor wants to sell or refinance the homestead. Filing bankruptcy and naming the creditor with the lien does not by itself automatically remove the lien although the automatic stay prohibits the creditor from enforcing the lien or making any other attempt to collect the debt.

There are two ways a debtor can clear a lien from homestead after bankruptcy. Florida Statute 222.01 provides a method to clear a lien from a homestead when the owner wants to sell or refinance the home. The owner provides the lien creditor a Notice of Homestead, and thereafter, the creditor has 45 days to contest homestead status. Another method used frequently is to ask the bankruptcy court to avoid the lien from property which has been claimed as exempt homestead. The debtor could file a motion in the bankruptcy court to avoid the lien that impairs the exempt property. However, in 2006, one Florida bankruptcy court denied a petition to remove a lien from homestead. The court said that a judgment did not create a lien against homestead property as a matter of law and that bankruptcy courts cannot avoid a lien which could not be created in the first place. Other bankruptcy courts have avoided liens from homestead.

In my experience, the statutory lien avoidance procedure is the simplest and most economical way to rid homestead title of judicial liens appearing on the public record. Bankruptcy debtors should understand that while a bankruptcy may discharge an underlying debt, the bankruptcy does not automatically clear the recorded title of homestead properties.

posted by Jonathan Alper, banrkuptcy and asset protection lawyer, Orlando, Florida