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Do I Need To List A Debt if I Have Received a Satisfaction of Judgment and Release of Lien?

By Joseph McDaniel, Esq.

It always makes me happy when I can tell that a client has done the Bankruptcy Homework and understands that it's absolutely necessary to list all their debts, whether the debt is dischargeable, non-dischargeable, disputed, unliquidated, contingent, or from Neptune.

Recently a client of mine, who will soon be filing an Arizona Bankruptcy, asked me if she needed to list a debt that was old.

I said yes.

She asked if it mattered whether she disputed the debt.

I said list it; the disputed debts are the ones that will bite you for certain!

She asked if it mattered that she had argued with the creditor.

I said that money talks, and creditors file lawsuits! So list the debt.

She said, does it make a difference if I have a Satisfaction of Judgment and Release of Lien?

And I said, YES!

Under that circumstance, you no longer have a debt; if a creditor gives you a satisfaction of judgment and release of lien, that means that the creditor sued you, obtained a judgment against you, filed that judgment in the Country Recorder's Office, obtained a judgment lien against your house, and THEN you paid the creditor, and the creditor agreed that it had been paid, and released the lien (which a creditor will never do until he's been paid in full, or according to whatever deal you've cut with the creditor).

So under that limited circumstance, you don't need to list them as a creditor, because they are no longer a creditor!

But if you paid 'em recently, make sure you list that as a transfer (the payment of x to that creditor), because the Chapter 7 Trustee may decide to sue that creditor for receipt of a preference if you paid them within 90 days of the Chapter 7 Bankruptcy filing!

Full post as published by Arizona Bankruptcy Attorney Blog on March 03, 2011 (boomark / email).