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United Supply Company, Inc. v. O’Malley & Sons, Inc.

2005 WL 3439877 (N.J. Super. App. Div. 2005) (Unpublished)

LIENS; BANKRUPTCY—Under a New Jersey statute, a pre-bankruptcy lien may be discharged if it goes unenforced for one year after the discharge in bankruptcy and the lien was subject to discharge in the bankruptcy proceeding.

A material supplier obtained a judgment against a corporation and the individual that owned the corporation. The judgment was docketed but was never levied or executed upon before the individual and his wife filed an voluntary petition in bankruptcy. The husband and wife claimed an exemption as to certain real property and the exemption was allowed. Eventually, the trustee in bankruptcy filed a Notice of Abandonment, and the property reverted to the husband and wife, “subject to the judgment lien which remained as an encumbrance upon the property.” The judgment debtor and his wife were later released by the Bankruptcy Court “from all dischargeable debts,” including the debt owed personally by the judgment debtor to the material supply company on its judgment. Twelve years later, the judgment debtor continued to live in the house, though neither he nor his wife were the title owners of the real property. At that time, they sought a discharge of judgment lien pursuant to N.J.S.A. 2A:16-49.1. “There are two requirements for a discharge under N.J.S.A. 2A:16-49.1: (1) the debtor must wait one year and (2) the lien must have been subject to discharge in the bankruptcy proceeding.” This particular judgment lien was subject to discharge because the judgment creditor never perfected the lien. The fact that the material supplier had levied on the property was to no avail because it did so “during a time when the automatic stay due to the bankruptcy proceeding was in effect.” Further, the judgment creditor “never attempted to execute on its lien after the Trustee’s abandonment and release of the property nor for more than one year after conclusion of the bankruptcy proceedings.” Therefore, the statutory pre-conditions for a discharge of the lien existed and the lower court, with the affirmance of the Appellate Division, ordered the lien discharged.

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