When Bankruptcy Is Filed Can You File a Lis Pendens?

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Lis pendens is a Latin term that means "suit pending." Modernly, it is a legal notice filed with a county recorder that gives notice that a lawsuit regarding real property is ongoing. Upon the filing of a bankruptcy case, you are prohibited from filing a lis pendens, among other documents and actions.

Lis Pendens and Bankruptcy Estate Property

Upon the filing of a bankruptcy case, all of the property of the debtor automatically becomes property of the bankruptcy estate. A trustee controls and represents the bankruptcy estate. If a lis pendens is filed against real property that is part of the bankruptcy estate, it acts to cloud the title of the real property. Clouded title means that there is question as to who has an interest in the property. Clouded title also means that the trustee will have significant difficulty in selling the property.

The Protection of the Automatic Stay

In addition to all of the debtor's property becoming property of the estate upon a bankruptcy filing, the automatic stay also goes into effect. The automatic stay is an injunction that prevents any party from seeking to collect from the debtor or property of the estate. The filing of a lis pendens is one of the filings disallowed by the automatic stay. Filing a lis pendens is a violation of the automatic stay.

Consequences of Filing Lis Pendens

If you file a lis pendens and violate the automatic stay, the person or entity that filed the lis pendens faces liability. The bankruptcy trustee or the debtor may sue in bankruptcy court and seek money damages. Furthermore, any act taken in violation of the automatic stay is void "ab initio," or from the beginning. This means that the lis pendens will be treated as if it never was filed.

Alternative Remedies

As the filing of a lis pendens is prohibited by the automatic stay, other avenues must be explored. The person or entity that claims an interest in the real property should contact the bankruptcy trustee to discuss the claimed interest in the property. If the trustee has sufficient proof of the claim, he may choose not to sell the property. Furthermore, the person or entity claiming the interest may file a lawsuit in bankruptcy court to determine their interest in the property. The filing of suits in bankruptcy court does not violate the automatic stay.

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References

  • "Bankruptcy and Debtor/Creditor Examples and Explanations"; Brian A. Blum; 2010
  • "West's Bankruptcy Code, Rules, and Forms"; Thomson West; 2010
  • "Collier on Bankruptcy"; Alan N. Resnick et al.; 2010
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