Legal Question in Bankruptcy in Texas

Re: does discharge of debt also serve as release of lien on real property securi

Hi.

You sound like you're in a fix. Let's see what we can figure out to help you.

A lien generally secures two different types of liabilities: the personal liability of the debtor to the mortgagee (ie., a lawsuit NOT to foreclose on the collateral but to obtain a judgment against the debtor), and the lien on the house (or other secured property). While the bankruptcy may discharge the personal liability part (unless a reaffirmation agreement is signed), it does not, in and of itself, wipe out the lienor's rights against the collateral.

The only ways a lien can be wiped out in bankruptcy, if (a) if the property is sold and the lien is pid, or (b) if the lien is wiped out by virute of an order or judgment of the Bankruptcy Court, because, for example, it was shown to have impaired your exemption, it was a preference or fraudulent conveyance, etc.

One way we can try to proceed is to see if the lien can be wiped out by reopening the case and trying to get it wiped out for one of those reasons, primirily because it impaired your exemption (11 U.S.C. Section 522[f]. But it's a bitch to reopen, and some courts get very pissed about trying to do so where it's been more than 6 years. Regardless, you can see a local bankr. atty to see if he/she will pursue this option, if it can be pursued.

The second way is: at least in NY, I know that if a mortgage is not enforced for 6 years after default with no events occurring in the meantime to revive it, it can't be enforced, and you can even sue for an Order discharging it. There may be a like provision in Tx. I don't know, but have your closing attorney check out whether this is the case, and if it is, pursue it.

Otherwise, the only way to proceed is to try to see if you can get a release from the owner of the company now, by maybe paying him/her some money. Note: this money really belongs to the bankruptcy estate of that company (I am shocked that - if it went into a 7 - the trustee in that case did nothing to try to enforce your mortgage. I'm a trustee too and that is plain negligence.) but you're indicating that the mortgagee's case is closed, so you may have to go into bankruptcy archives to get this person's name, and even if you do, he/she may be eluctant to deal with you, based on the fear that he/she is doiong something wrong, but you can quote him/her to the law that when a case is closed, unadministered assets are deemed to be abandoned to the debtor under 11 U.S.C. Section 554.

I would try the second option above first, then the first, and then the third, myself.

Good luck!

Neil Ackerman 516-228-8245