Bankruptcy – Orders to Sell Free and Clear of All Liens

We are seeing more orders to sell free and clear of all liens coming out of bankruptcy. These orders are obtained by the Trustee and recite the sale is free from any and all liens.

For our purposes, we need to make sure all the liens and judgments are a part of the bankruptcy case. To do so, we will need to check the schedules and if a creditor isn’t listed contact underwriting. While unlikely an interest isn’t listed, it does happen and we are better off catching it.

Make sure that you raise as a requirement the recording of any free and clear order. If the bankruptcy is permitting the property to pass without liens, we need to make sure that title reflects same. While the bankruptcy attorney won’t understand why, we need the record to reflect why all the judgments and liens are not being addressed. It should be clear to any subsequent examination that the court cleared the liens and judgments through its proceedings. If it isn’t clear, then the matter will come back to you.

Finally, and most importantly, if you aren’t sure if the bankruptcy is selling the property free and clear, contact the attorney or Underwriting. We’ve seen instances where the parties maintain they are selling “free and clear” only to produce an order that does not provide same. It may be a matter of getting an amended order, but whatever the case, the words are necessary.

Written by Steve Zablocki, Underwriting Counsel