Abstracts of Judgment in Bankruptcy
Question Details: Currently I have an abstract of judgment filed against an individual who is in jail for fraud. It's been filed for over a year. There is talk of creditors filing an involuntary BK on this individual. These creditors have judgment liens for over 90 days now. If the involuntary is filed now, will these judgment liens be considered secured in the Ch 7 BK? I filed my abstract first and will it be honored first or will it be grouped together with the other abstracts and be paid pro rata? Also, what if an abstract is filed even just one day before the BK filing, will it be considered secured?
Bankruptcy Law Answers
Abstracts of judgment are secured against whatever collateral they attach to (usually real estate) and the priority is based on the date recorded. Whether they are/will be paid depends on if there is any equity in the property above the lien created by the abstract. An abstract recorded one day prior to a bankruptcy case is secured, but is subject to being set aside as a preferential transfer under 11 USC 547.
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