Bankruptcy searches can reveal situations when an Abstract of Judgment has been recorded and the seller has subsequently filed for relief under the bankruptcy laws. The discharge of the seller’s bankruptcy, however, doesn’t eliminate the lien of the recorded judgment. Bankruptcy does NOT eliminate the lien of the recorded judgment! Once recorded, it essentially becomes a “perfected lien” and will only be removed by an “Avoidance of Lien Order” from a bankruptcy court.
Although a bankruptcy discharge might relieve the debtor of personal liability, it doesn’t eliminate the lien. The creditor might not be able to attach the wages or property of the debtor but he still has a lien against the property, which can then be enforced against a third party.
A title company won’t insure over the amount of the lien for this reason and will require either the appropriate court order or the actual payment of the lien. Bankruptcy must be finalized first.