Bankruptcy Law

James Cole, Esquire

Bankruptcy court permits a Chapter 7 case that was closed for eight years to be reopened for lien avoidance under § 522(f).   In re Shelton, No. 04-52378-659 (Bankr. E.D. Mo. October 24, 2013).  

Debtors’ Chapter 7 case was filed on 9-29-04, and debtors received a discharge on 1-05-05.  Debtors did not move to avoid any liens.  On 1-31-13, a creditor holding a pre-petition judgment lien levied on the debtors’ real property in circuit court.  Debtors filed in the bankruptcy court to reopen the Chapter 7 to avoid the judgment lien as an impairment of their exemptions under § 522(f). 

The bankruptcy code does not set a deadline for motions to avoid liens under § 522(f), and the doctrine of laches requires “unreasonable and inexcusable delay resulting in prejudice to the creditor.” (Slip op. at 3.) Creditor failed to make a showing of prejudice sufficient to overcome debtors’ right to avoid the lien.  The case was reopened for further proceedings on debtors’ motion to avoid lien.