Q. Do judgments survive after a bankruptcy?
A. It depends but yes, sometimes they can!
When you buy or sell a home, the buyer will obtain title insurance, and a title search on the property will be conducted. If there are any open judgments against the buyer, the seller or the property on the public record, the title company will seek to clear those defects on the title. If a bankruptcy was involved, they will ask for copies of the bankruptcy schedules, notices showing the creditors/plaintiffs and the amounts due them, as well as, a copy of the bankruptcy discharge papers. Often times, the title company is told by the sellers, borrowers and/or mortgage processors/loan officers this is their evidence the debt was discharged in the bankruptcy, and the title company is asked to remove the judgments based on that documentation.
The title company is unable to comply with this request unless they are provided with an Order from the Bankruptcy Court for an Avoidance of Lien for said judgments. Although the debts may have been included in the proceeding and are discharged by the bankruptcy, the debtor is only released from personal liability of the debt, the debt continues as liens on the property of the bankrupt estate unless avoided by court order. The bankruptcy discharge prevents the enforcement of the claim against the person, however, it does not discharge the claim against the property of the debtor.
If the judgment is on record, the lien will still affect the real estate sale and will be in a lien position ahead of the mortgage; therefore, the title company will need to request a payoff from the creditor/plaintiff and pay off the lien at the closing in order to obtain a satisfaction or release of the property from the lien.