lien priority Archives - National Consumer Bankruptcy Rights Center

by ncbrc on March 20, 2020

No Equitable Subordination of Liens in Pennsylvania

Neither Pennsylvania nor the Third Circuit apply the doctrine of equitable subordination to reprioritize a junior lien over a modified senior lien. Hamilton v. Pa. Hous. Fin. Agy., No 18-5417 (E.D. Pa. March 5, 2020).

The debtors had a home mortgage for $145,000. They defaulted on their mortgage and applied for Homeowner’s Emergency Mortgage Assistance (HEMAP). Through that program, they entered into an open-ended mortgage with the Pennsylvania Housing Finance Agency (PHFA) which operated as a line of credit with a principal of $51,000. PHFA then satisfied the mortgage arrearage and maintained the mortgage through April, 2013. In May, 2013, the then-current mortgage holder obtained a judgment of foreclosure against the debtors in the amount of $139,447.26. After that, the debtors and the mortgage assignee, entered into a modified agreement which the debtors later defaulted on. When the creditor sought to foreclose, the debtors filed for chapter 13 bankruptcy. PHFA filed a claim for over $18,000 and the mortgage creditor filed a claim for over $189,000. Because the mortgage lien exceeded the value of the property, the debtors moved the bankruptcy court to find the PHFA junior debt wholly unsecured under section 506(a). [Read more…] about No Equitable Subordination of Liens in Pennsylvania

by ncbrc on January 11, 2018

Code Does Not Entitle Trustee to Sell Free and Clear of Creditor’s Judgment Liens

The bankruptcy estate’s interest in property does not become superior to a valid senior judgment lien even though the bankruptcy trustee took the steps necessary to avoid a fraudulent transfer and bring the property into the estate. In re Knight, No. 16-584 (Bankr. D. S.C. Nov. 6, 2017).

Apex Bank obtained two judgments against Talmadge Knight in state court. By operation of state law, the judgments resulted in liens on Mr. Knight’s property. Shortly thereafter, Mr. Knight transferred his farm property, Saluda, to Ambler Road, LLC., an entity owned solely by Mr. Knight. Mr. Knight later filed for chapter 7 bankruptcy. Apex filed two proofs of claim totaling approximately $1.9 million. The trustee filed an adversary proceeding to avoid the transfer of the Saluda property from Mr. Knight to Ambler. That proceeding was settled and the transfer avoided. The trustee then arranged a sale of the property for $146,000 and moved the court for permission to sell free and clear of liens. The motion contained some inaccuracies about the property and did not mention Apex’s judgment liens. [Read more…] about Code Does Not Entitle Trustee to Sell Free and Clear of Creditor’s Judgment Liens

by Tara Twomey on November 4, 2014

Nevada Banks Take a Gamble when it Comes to HOA Liens

In a 4-3 decision, the Nevada Supreme Court decided that Nev. Rev. St. 116.3116 gives a homeowners’ association (HOA) a superpriority lien based on certain unpaid dues and assessments so as to extinguish the first deed of trust upon foreclosure. SFR Investments Pool v. U.S. Bank, No. 63078 (Nev. S. Ct. Sept. 18, 2014). The court also held that, under the statute, an HOA may use a non-judicial foreclosure.