The Effect of a Lien on Trailer Homes in Bankruptcy

 A former client recently found himself in a situation where a creditor sued him for an old debt that he had failed to pay. He never responded to the lawsuit and the creditor soon obtained a lien against him. The creditor then recorded the judgment with the county recorder. When the former client came to consult with me about proceeding with filing a bankruptcy case, he was curious to know what effect the recorded judgment would have, if any, on his personal residence. He lived in a trailer (or mobile home). In order to answer his question, we turned to the controlling Nevada law on the subject, which is found in Nevada Revised Statutes (“NRS”) 17.150 (2), and which states in pertinent part:

 

A transcript of the original docket or an abstract or copy of any judgment or decree of a district court of the State of Nevada or the District Court or other court of the United States in and for the District of Nevada, the enforcement of which has not been stayed on appeal, certified by the clerk of the court where the judgment or decree was rendered, may be recorded in the office of the county recorder in any county, and when so recorded it becomes a lien upon all the real property of the judgment debtor not exempt from execution in that county, owned by the judgment debtor at the time, or which the judgment debtor may afterward acquire, until the lien expires. (emphasis added).

 

In other words, the creditor that recorded the judgment created a lien against any real estate owned by the former client that was not exempt (i.e., protected by law). The former client had no real estate or land holdings to speak of besides the trailer, which itself sat upon land that he rented from a mobile home park. By reviewing another Nevada statute, I was able to show this client that the trailer itself was exempt property. NRS 21.090(m) states that the following property is exempt:

The dwelling of the judgment debtor occupied as a home for himself or herself and family, where the amount of equity held by the judgment debtor in the home does not exceed $550,000 in value and the dwelling is situated upon lands not owned by the judgment debtor.
 

How to apply the NRS with respect to the bankruptcy lien

Because this individual was living in the trailer and using it as his home, and he was renting the space where he parked the trailer, the trailer was exempt from the judgment that was recorded with the county recorder and no lien attached to the property. Moreover, after the bankruptcy was successfully completed, a discharge order was entered by the bankruptcy court creating an injunction against any type of collections on debts that were in existence at the time that the bankruptcy case was filed. In other words, even though the creditor had recorded its judgment prior to the filing of the bankruptcy case, no lien was created at the recording because there was no property owned by the former client at the time of the recorder and the debt was subsequently “wiped out” with the filing and successful completion of a chapter 7 bankruptcy case.