I have judgment against defaulting tenant and recorded abstract of judgment. 6 months later tenant filed bankruptcy. Am I a secured creditor?

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I have judgment against defaulting tenant and recorded abstract of judgment. 6 months later tenant filed bankruptcy. Am I a secured creditor?

Can my judgment be discharged by bankrupcy court?

Asked on June 12, 2009 under Bankruptcy Law, California

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

You are not a secured creditor.  A secured creditor is a creditor having a claim that is protected by specific assets.  For example, the owner of a mortgage can force the sale of or can take possession of the real estate that is mortgaged if the borrower fails to meet the terms of the lending agreement.

You are an unsecured creditor whether or not you filed an abstract of judgement.  The act of recording does not give you a security interest.  Again, there must be a specific asset involved like a car or the previously mentioned mortgaged property.  

As to your judgement surviving bankruptcy, if its a Chapter 7, then the Chapter 7 will generally eliminate all unsecured debts, including yours.  In a Chapter 13 case, the debtor pays all or only a portion of their debts, depending on how much disposable income they have each month.  So if your former tenant files a Chapter13, you stand to get at least some of the money that you are owed.

Note:  If a Chapter 13 is filed, and you are not paid all of the money that you are owed, then at the completion of the bankruptcy the rest of your tenant's debt to you will be discharged; they will no longer owe you any money.  What, if anything, you receive during the bankruptcy is all that you are legally entitled to.

 


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