Bankr. M.D.N.C.: In re Dean- Laches and Avoidance of Judgment Lien

Summary:

Ferguson obtained a judgment in 2008 against the Robert Dean, who, with his then wife, Lisa Dean, subsequently filed a Chapter 7 bankruptcy in 2010. Believing that the real property was held as Tenants by the Entireties, the judgment lien was not avoided and the Deans received a discharge. Subsequently, the Deans divorced with Mr. Dean transferring his interest in the real property to Lisa and her new husband. When Lisa sought to refinance the real property in 2015, the judgment lien was discovered. The Debtors then sought to re-open the bankruptcy and to avoid the lien, with Ferguson objecting.

While finding that there was no time limitation for avoiding a lien or reopening a case under 11 U.S.C. §§ 350 (b) or 522(f) nor Fed. R. Bankr. P. 4003(d), 5010 or 9024, the bankruptcy court held that “such motions are subject to equitable limitations and may be denied for reasons such as prejudice, laches, reliance, estoppel, or fraud.” Ferguson asserted the defense of laches which requires:
(1) lack of diligence by the party against whom the defense is asserted; and
(2) prejudice to the party asserting the defense.” Costello v. U.S., 365 U.S. 265, 283 (1961)

The mere passage of time does not constitute prejudice unless combined with other factors, particularly “if parties have incurred costs in executing on a judgment lien in state court in reliance upon a debtor’s previous inaction in bankruptcy.” As Ferguson had taken no such actions, avoidance was not barred by laches.

Commentary:

Without citation, this is largely the same analysis as in the recent E.D.N.C. opinion of In re Abuharb, except there the judgment creditor had expended time and incurred costs in multiple multiple actions to avoid the lien and was allowed reimbursement for such expenses.

For a copy of the opinion, please see:

Dean- Laches and Avoidance of Judgment Lien

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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