One of the bills that did get passed by the 2015 regular legislative session, is correcting a somewhat controversial fee-grabbing stunt by the state court administrator, returning the status quo for post-bankruptcy state court judgment release.

After a person gets a bankruptcy discharge, if they have judgments against them from prior to the bankruptcy, the judgment becomes void, meaning that they are of no force and effect and cannot be used for collecting on debts. However, the fact that a district court judge determined that the debtor owed the money to the creditor, i.e. that judgment, stays on the person’s record for 10 years, and could affect the person’s credit report. While there is an argument that bankruptcy law requires the creditor to take affirmative steps to remove the judgment, there had always been a rather simple procedure for the debtor to complete, in order to get the judgment cleared off after paying a $5 fee. In January 2014, the state court administrator, on its own initiative, determined that it could raise revenue by interpreting a contradictory provision from a different portion of the state statute, and charge debtors an additional $322 per judgment, thus making it cost prohibitive, particularly with debtors with numerous judgments. This ended up being a real problem for people who for instance had filed bankruptcy many years earlier, had not gone through the procedure back when the filing fee was only five dollars, and were now ready to sell or refinance their house, because the judgments, albeit uncollectible, are still a cloud on the title of their real estate.

The irony is that the state court administrator said that it changed its policy because there were different interpretations across the state. To the best of my knowledge, as well as the knowledge of all of the bankruptcy attorneys across the state with whom I am in regular contact, the fee was five dollars across-the-board prior to this interpretation, and once the court administrator issued this new policy, there was great variation from county to county across the state.

A couple of colleagues and myself had initiated the steps to start a court challenge to this process. However, once this year’s legislative session picked up steam, we decided not to move forward with the court action. Unfortunately, there are still people who are going to be affected by this, because the new law does not officially take effect until August 1. And of course, the people who have paid the $322 in the last year and a half were ripped off, and could arguably be entitled to a refund, because the 2014 policy change was not directed through the legislative process.

Thanks to Senator Limmer and Representative Franson for guiding this legislation through. The text of the statute, which is a simple additional sentence of clarification, can be found at section 19 of chapter 65 of the 2015 session laws.