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Court opinion:
A person lives on a property that sits directly on top of the line between Trimble County and Carroll County in Kentucky. Most of the house is in Carroll County, but the driveway and part of the house are in Trimble County. The property's deed, and two mortgages on the property, are recorded with the Carroll County clerk, and the property tax is paid to Carroll County. However, the person's driver license states that he resides in Trimble County, and he has voted in Trimble County in the four most recent elections.
The person buys on credit, registers, and titles a semi-truck in Trimble County. Accordingly, the creditor files a lien on the truck with the Trimble County clerk. However, when the person files for bankruptcy, he argues in bankruptcy court: he actually resides in Carroll County; since the lien was not filed in his county of residence, it is invalid under state law; and, therefore, the lien must be "avoided" (deleted) in the federal bankruptcy.
The bankruptcy judge agrees with the debtor and avoids the lien. A slight majority of the property is in Carroll County, so the deed was recorded in Carroll County, and that is conclusive proof of the debtor's county of residence under state law. State law incorporates "a policy of certainty in the recording of mortgages on both real and personal property", and allowing a person to pick and choose which of two counties is his county of residence would frustrate that policy. The debtor cannot be faulted for giving the wrong county of residence in the credit application, as (1) the application was only attested, not sworn, before a notary, and (2), if the application was not sworn, then under state law it was the creditor's responsibility to check the county of residence before filing the lien.
This is the sort of rules-lawyering I'm never in favor of, even when it helps out "the common man". IMO the creditor "deserves" to take the truck, morally. The man falsely declared his county of residence, and checking his license (which I assume is the main way a dealer would confirm that information) would have backed that up. They should be allowed to re-file the lien in the proper county if it's that big a deal and reclaim the truck.
Agreed that the creditor should be able to refile. I don’t know the terminology well enough to say if that is true.
But that doesn’t mean this was an unjust verdict! He lives in a weird edge case where the codified law says one thing and the title paperwork say another. He shouldn’t be held responsible for a mistake on the county’s forms.
Just to be clear, the creditor can't refile. Once the debtor files for bankruptcy, any collection actions for existing debts are automatically stayed, barring a court order to lift the stay. These orders are usually only granted if there is a secured debt, e.g. a mortgage or car loan. A judge is never going to lift the stay to allow an unsecured creditor to file a lien against the debtor. Doing this would completely subvert the intention of the bankruptcy code, since bankruptcy, with certain rare exceptions, can't remove any liens that exist at the time of filing. If they were allowed to do this then every unsecured creditor would sue the debtor and get a judgment against them, converting the unsecured debt to a secured debt, making discharge impossible. As I explained below, the debtor gains nothing from the banks error, and possibly even suffers a bit himself. The bank is supposed to be the sophisticated party here but they fucked up because they didn't comply with the relatively straightforward safe harbor provisions. I don't have much sympathy for them.
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