Title Tips by Tute
Volume 13, Number 2
I have a judgment in favor of Semi-Sleazy Lender, dated 1995, in the amount of $1,898.77.
It's against three people, one of which is a prior owner of property being refinanced. On the judgment there is a line that states: HOMESTEAD EXEMPTION WAIVED, next to this are three check boxes. "No" is checked.
Does this judgment affect title? Can it be removed?
In for a penny, in for a pound. If the judgment is against one of your prior owners, and there are no other defenses, then the judgment attached. Unlike the Florida homestead exemption, which was so vividly portrayed in the national media during the fallout from the O. J. Simpson trial, Virginia’s homestead exemption operates more like a “this is the bare minimum you can keep when your world falls apart,” than a shield to protect one’s castle from predatory creditors.
If your prior owner held title with a spouse as tenants by the entirety, or the property was conveyed more than ten years ago to a bona fide purchaser for value, those facts may change the result. There is also the possibility that your prior owner’s name is not unique, and the lien was meant to attach to the property of another person with the same name. Report it, and note it for your underwriting staff to review.
Our customer filed and was discharged from a Chapter 7 bankruptcy in 1993, and listed a Wage Garnishment for a vehicle loan on his Creditor's Schedule. The Garnishment was filed/in 1989. Does the Garnishment still constitute a lien on the client's property, or only his wages?
And do Virginia judgments attach to future acquired property? Thanks very much.
New In town
Dear New Guy:
Let me start with kudos to the practices in your former location. Is checking the bankruptcy court in all exams part of the standard operating procedure there? Especially with all the press attention recently about the rising numbers of defaults in the sub-prime loan market, that sounds like a good idea for our time.
Did the auto loan lender obtain and docket a judgment in your jurisdiction prior to the garnishment listed in the bankruptcy? If not docketed in the jurisdiction in which the real estate for your transaction is located, it is not going to be a lien against the real estate. Garnishment is a collection tool, not the judgment itself – although the creditor has to have a judgment in order to use the garnishment tool.
Did the debtor discharge the auto loan debt? Did they keep (which would require a reaffirmation of the debt) or return (abandon) the vehicle? The schedules attached to the petition are useful, but the remedies ordered by a bankruptcy court won’t be evident from the pleadings.
If the judgment was not docketed in your jurisdiction and discharged by the borrower in their bankruptcy without any reaffirmation, it should be gone entirely. If the judgment was docketed in your jurisdiction prior to the bankruptcy, and the debtor owned the real estate being examined at that time, then it did attach to the real estate, and while the debtor can’t be compelled to pay, the real estate still owes the money.
Moving on to your second question, which, in light of your first question, is both easy and hard to answer. First the simple answer.
Yes, a docketed judgment would be a lien which would attach to any real estate purchased by the debtor during the next 20 years.
However, if your timeline reflects the following:
Year 0 - Judgment docketed
Year 5 - Debtor filed bankruptcy
Year 6 - Debtor discharged debt
(remember that not all debts on the schedule may be dischargeable)
Year 15 - Debtor purchases real property
Then the intervening bankruptcy would discharge the obligation and no lien would attach.
Clear as mud?