The property is homesteaded and the HELOC was discharged in my ch. 7 bankruptcy. I believe I am allowed to reopen my bankruptcy chapter 7 case in order to file a "Motion to Avoid Lien" based on the HELOC's incorrect legal description, am I correct? From what I have read, this makes the lien NOT perfected. If this is correct and I can do this ... Is the totally incorrect legal description a firm legal basis that a judge could not deny, OR is it up to the bankruptcy judge's discretion (who could deny it)?
Short answer is no. The basis for you trying to avoid the lien has nothing to do with bankruptcy or federal law. Yours is a state law question, so you would deal with this issue in state court, not federal bankruptcy court.
I can't speak to FL real estate law, but these rules are similar across states. There is a distinct difference between having a lien and having a perfected lien. You can still have a valid lien against collateral although it is not perfected. There is still a security instrument and a note. All a perfected lien provides is notice to other potential claimants that you have a lien. Even under state law, failure to perfect a lien is not a basis to void the lien. Granted, I would agree that the property description is a material term to the agreement. The problem you have is one of credulity, there really is no dispute between you and the lender as to what property was supposed to be subject to the lien. Most likely, the court will allow them to reform the document and charge you their attorney fees for bringing a frivolous action (at least, that is worst case scenario for you).
A Motion to Avoid Lien is based on a bankruptcy statute where you can avoid a judgment lien that impairs your homestead. This motion is not a basis to set aside of avoid a consensual lien such as a mortgage. Mortgage lenders also have certain rights to reform a mortgage. Further analysis would be needed to review whether you can reopen your case for purposes of filing an adversary complaint to determine the validity of the heloc.
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Mortgage liens and HELOCs cannot be stripped in a Ch7. Whether you could avoid the HELOC due a faulty/inaccurate legal description would require a more thorough analysis of the language in question and the particulars of your case and the attitude of your judges. Also, do not expect the HELOC mortgage provider to just accept the judge's decision if it goes against them, they'll likely appeal to district court and even further if necessary. Go see your bk lawyer for an analysis of your situation
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HELOCs and second mortgage liens cannot be stripped in a Chapter 7. They can, however, be stripped in a Chapter 13, if there is no equity in the property (i.e. you owe more on the first mortgage than the property is worth). You may need to order an appraisal of the property to determine if the HELOC can be stripped.
You need to speak to an experienced bankruptcy attorney to determine if you'd be eligible to strip off the HELOC in a Chapter 13.
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