Legal Question in Bankruptcy in California

Re: Should we file a ''Motion to set aside lien''?

Unless the lien was avoided in the bankruptcy, it survived against the property. All bankruptcy did (assuming the Ch. 13 plan was consummated) was discharge the obligation to pay the debt, but it doesn't alter the security interest, unless a motion to avoid lien was approved. The only way I can think of to get rid of the lien is to either pay it, or try to reopen the case to file a motion to avoid the lien (assuming it was avoidable), but since it was a voluntary lien, the only way to have avoided it would have been to file a motion to value the claim under 11 USC 506 and basically strip the lien. Without seeing the Chapter 13 plan, I couldn't tell you whether that was done or not. I have my doubts about whether it can be done now, but it will depend on the jurisdiction where the case was filed.

Re: Should we file a ''Motion to set aside lien''?

You say the "owners" foreclosed on your client; if the owners' interest was senior to the 2nd deed of trsut (i.e., they held the 1st deed of trust), then their foreclosure EXTINGUISHED the security interest represented by the 2nd trust deed. If this is the case, then you need to get a new title company, because the trustee's deed from the holder of a senior lien would "wipe out" a junior lien (the 2nd) and your title company is not accurately reflecting this on title. Naturally, I am assuming that the "foreclosure" you reference was completed and it was not a situation where your client deeded the property back in lieu of foreclosure. If all else fails, you can commence an action for quiet title agaisnt the holder of this lien; if he concedes that he has no security interest, it will likely go by way of default. With respect to the bankruptcy, if the property was not listed as an asset of the bankruptcy estate, I do not see how you can re-open the bankruptcy to accomplish what you want in that forum; you would have to start over and list that asset.