When a Judgment Lien Meets Bankruptcy: Timing, Property Type, and Preference Avoidance

By: Michael L. Moskowitz, Esq.

A recent decision from the United States Bankruptcy Court for the Southern District of New York, In re Erica Itzhak, Adv. Pro. No. 25-01029 (Bankr. S.D.N.Y. Oct. 21, 2025), highlights a subtle yet crucial distinction under New York law: the difference between when a judgment lien attaches to real property versus personal property—and how that timing determines whether the lien survives a debtor’s bankruptcy filing.

Bankruptcy Judge John P. Mastando III’s opinion offers a clear application of 11 U.S.C. § 547(b), holding that an attempt to enfoce a pre-petition judgment by placing a lien on a debtor’s cooperative apartment shares constituted a preferential transfer because it was perfected within the 90-day pre-petition window. The decision is based upon how and when the lien was perfected.

Background of the Case

Debtor filed for Chapter 13 bankruptcy (later converted to Subchapter V of Chapter 11) following a $1.5 million malpractice judgment.

On February 15, 2024, the Judgment Creditor delivered an Execution with Notice to Garnishee to the Sheriff, thereby creating a lien on the then Judgment-Debtor’s cooperative apartment shares. Less than three months later, on April 19, 2024, the Judgment-Debtor filed for bankruptcy.

Debtor sought to avoid the lien as a preferential transfer under § 547(b). Bankruptcy Judge Mastando agreed, granting summary judgment in favor of debtor and voiding the lien as a preference.

Real Property vs. Personal Property: The Crucial Distinction

Under NY CPLR § 5203, a judgment automatically becomes a lien on real property upon docketing in the county clerk’s office. That perfection is immediate.

However, for personal property, including cooperative apartment shares (treated as personalty under New York law), no lien arises until the creditor delivers an execution to the sheriff under NY CPLR § 5202(a). Until that step occurs, the judgment creditor's claim remains unsecured.

In Itzhak, because the lien attached when the Sheriff received the execution—not when judgment was entered—the court deemed that the transfer occurred within 90 days of the bankruptcy filing, satisfying § 547(b)(4)’s timing requirement permitting the court to avoid the lien.

Because the execution was delivered 64 days before the bankruptcy filing, and because the lien elevated the Judgment Creditor from unsecured to partially secured status, all elements of § 547(b) were satisfied.

The Court’s Analysis

Bankruptcy Judge Mastando methodically rejected the Judgment Creditor’s argument that perfection occurred upon entry of the 2022 judgment. Citing In re Lucasa Int’l, Ltd., 13 B.R. 596 (Bankr. S.D.N.Y. 1981) and NY CPLR § 5202(a), the court held that a judgment lien on personal property is not perfected until execution is delivered to the sheriff.  Because this perfection occurred within the 90-day window, the judgment lien was avoidable as a preference.

Practical Implications

• Real property vs. personal property matters.
  • Real property: Judgment liens attach upon docketing.
  • Personal property: Lien arises only upon execution delivery to the sheriff.
• Timing is everything.
  • A creditor who perfects a lien within 90 days before bankruptcy risks having it voided as a preferential transfer.
• Cooperative apartments are personal property.
  • Because co-op shares are considered personal property under New York law, enforcement actions must be carefully timed to avoid § 547 exposure.

Conclusion

The Itzhak decision illustrates how the interplay between state law lien mechanics and federal bankruptcy preference rules can radically affect a creditor's rights. Judgment creditors must act promptly—and with an understanding of whether their lien attaches to real or personal property—lest a well-earned judgment become uncollectible after a debtor’s bankruptcy filing.

For guidance on lien perfection, preference exposure, or other creditor-rights issues, contact FRB's Creditors’ Rights & Bankruptcy Practice Group at (516) 599-0888 or fill out the form below.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.