Discharge Requirements in General

A discharge in bankruptcy must involve a “debt” (see 11 U.S.C. Sec. 101(12)), the debt must not be excepted from discharge (see 11 U.S.C. Sec. 523), and the debtor must not be subject to denial of discharge (see 11 U.S.C. Secs. 727(a), 1141(d)). To be dischargeable in bankruptcy, a debt must involve a creditor’s right to payment by the debtor. Where a creditor has perfected a judgment lien by recording an abstract of judgment prior to the debtor's filing for bankruptcy, the lien survives the debtor's discharge, so long as it has not been avoided by the bankruptcy trustee. (Songer v. Cooney (1989) 214 Cal.App.3d 387, 391; see McCready v. Whorf (2015) 235 Cal.App.4th 478, 481 [debtor’s bankruptcy extinguished his personal liability on the judgment, but not creditor’s lien on debtor’s profits].)

11 U.S.C. Sec. 524 provides

1. A discharge in a case under this title
1. voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title, whether or not discharge of such debt is waived;
2. operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; and
3. operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor of the kind specified in section 541(a)(2) of this title that is acquired after the commencement of the case, on account of any allowable community claim, except a community claim that is excepted from discharge under section 523, 1228(a)(1), or 1328(a)(1), or that would be so excepted, determined in accordance with the provisions of sections 523(c) and 523(d) of this title, in a case concerning the debtor's spouse commenced on the date of the filing of the petition in the case concerning the debtor, whether or not discharge of the debt based on such community claim is waived.

Exceptions from Bankruptcy Discharge

11 U.S.C. Sec. 523(a)(3)(A) excepts from the bankruptcy discharge debts neither listed nor scheduled in time to permit timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time to timely file a claim.

The advisory committee note to Fed.R.Bank.P 4007 states: “Subdivision (b) does not contain a time limit for filing a complaint to determine the dischargeability of a type of debt listed as nondischargeable under § 523(a)(1), (3), (5), (7), (8), or (9). Jurisdiction over this issue on these debts is held concurrently by the bankruptcy court and any appropriate nonbankruptcy forum.” (Watson v. Shandell (In re Watson), 192 B.R. 739, 746 (Bankr. 9th Cir. Cal. 1996); Flores v. Kmart Corp. (2012) 202 Cal.App.4th 1316, 1325.)

An unscheduled debt can be discharged in a Chapter 7 bankruptcy case. In a no asset, no claims bar date Chapter 7 case, an omitted debt that is of a type covered by 11 U.S.C. Sec. 523(a)(3)(A), is discharged pursuant to 11 U.S.C. § 727. (Beezley v. California Land Title Co. (1993) 994 F.2d 1433, 1434.)

Discharge of Judicial Liens

“Generally, valid, perfected judicial liens which precede bankruptcy survive and are enforceable after bankruptcy.... The bankruptcy discharge does not prevent post-petition enforcement of valid liens. The secured creditor may proceed to enforce the lien, as an in rem action, and is not barred by the injunctive terms of 11 U.S.C. Sec. 524.” (In re Hermansen (B.C.D.C. Colo. 1988) 84 B.R. 729, 733.)

“In other words, a discharge in bankruptcy voids a judgment only to the extent of the debtor's personal liability.” (Songer v. Cooney (1989) 214 Cal.App.3d 387, 391.) “A discharge does not affect a judgment to the extent that it supports a lien perfected prior to bankruptcy.” (Id.) “As to such liens the judgment remains valid and enforceable after discharge.” (Id.)

“An exception to the general rule of survivability of liens arises where the debtor has obtained an order in the bankruptcy proceeding avoiding the lien.” (Id.)

Thus a debtor may avoid a judicial lien to the extent that it impairs an exemption. (11 U.S.C. Sec. 522(f).) For example, a judgment lien can be avoided to the extent of a homestead exemption. (See In re Hermansen, supra, 84 B.R. at 732-733.)

In addition a judgment is secured only to the value of the debtor's interest in the property, and to the extent that the judgment exceeds the value of the debtor's equity it is unsecured. (11 U.S.C. Sec. 506(a).) The debtor may request in bankruptcy that the unsecured portion of the judgment creditor's claim be disallowed (11 U.S.C. Sec. 502), and to the extent that the claim is disallowed the lien is void. (11 U.S.C. Sec. 506(d).)

If the proper procedures are followed, a judgment lien may survive bankruptcy to the extent of the debtor's equity in the property, if any, as determined in bankruptcy, less any exemption. The debtor will be entitled to any increase in equity which occurs after the discharge in bankruptcy. (Songer v. Cooney (1989) 214 Cal.App.3d 387, 391.)