Opinion ID: 1993867
Heading Depth: 1
Heading Rank: 4

Heading: Does the lien survive defendant's bankruptcy?

Text: While the Bankruptcy Act formerly declared in affirmative terms (see footnote 3) that qualified liens would be honored by the Bankruptcy Act, the present Section 67 (11 U.S.C. § 107) does so by exclusionary terms, as follows: a. (1) Every lien against the property of a person obtained by attachment, judgment, levy, or other legal or equitable process or proceedings within four months before the filing of a petition initiating a proceeding under this Act by or against such person shall be deemed null and void (a) if at the time when such lien was obtained such person was insolvent or (b) if such lien was sought and permitted in fraud of the provisions of this Act   . Plaintiff's lien is not one rendered invalid by the terms of the Act. See In re North Atlantic and Gulf Steamship Company, 204 F.Supp. 899, [1] 904, (D.C.S.D. N.Y.1962), affirmed sub nom Schilling, Trustee v. A/S D/S Dannebrog, 2 Cir., 320 F.2d 628, [1] 629. We then come to the final issues, under which defendant urges a) that the State court has no jurisdiction, and b) that the debt underlying the assignment is dischargeable in bankruptcy and that if so discharged, the assignment will become unenforceable. That the underlying debt is one provable and dischargeable in bankruptcy is not in dispute. In this area we find ourselves being asked, in substance, to declare a judgment, for the defendant's bankruptcy proceeding is pending and a discharge has neither been granted nor denied. In this connection we are to be reminded that a discharge in bankruptcy is not a payment or extinguishment of the debt; it is simply a bar to all future legal proceedings for the enforcement of the discharged debt. Collier, supra, ¶ 17.27 at page 1717,to which must be added, against the debtor. It follows, therefore, that a valid lien on property of the bankrupt existing at the time of the adjudication in bankruptcy, which is not avoided by the Bankruptcy Act, may be enforced notwithstanding the discharge of the bankrupt. Collier, supra, ¶ 17.29 at page 1735. See also quotation from Collier, supra, ¶ 17.30 at page 1740 et seq., and Smith v. Davis et al., 131 Me. 9, 158 A. 359, 81 A.L.R. 78. As to the matter of jurisdiction we suggest, with all deference, that the pension benefits never became in custodia legis (See In re Lion Overall Co., 48 F.Supp. 442 (D.C. S.D.N.Y.1942)), and if the defendant's pension benefits be considered assets falling within the responsibility of the trustee in bankruptcy, such trustee takes them subject to all valid liens, In re North Atlantic and Gulf Steamship Company, supra, 204 F. Supp. [1] at page 904. Additionally, no representative of the bankrupt's estate has found this proceeding to be within his official interest. Whether or not defendant receives a discharge in bankruptcy, plaintiff is entitled to enforce his lien, but if defendant receives a discharge in bankruptcy, a perpetual stay of proceedings and execution upon any judgment against the defendant is to be ordered. Smith, supra, 131 Me. at page 11, 158 A. 359. The case is remanded to the Superior Court for proceedings not inconsistent with this opinion. So ordered. DUFRESNE, J., did not sit.