One tool in the judgment collection toolbox is the judgment lien. While similar to other types of property liens, the judgment lien is distinct in a couple of ways. We advise anyone thinking of seeking a judgment against another party to learn as much as possible beforehand, including the details of the judgment lien.
In short, a judgment lien is distinct from other types of liens in terms of its origin, scope, and enforcement priority. Let us look at all three areas, beginning with origin.
How Liens Are Created
A lien is essentially a legal document establishing one party’s claim to a financial interest in another party’s personal property. If you own a home, your mortgage lender has a financial interest in that home until you have fully paid off your mortgage. A lien represents that interest.
Property liens can be created in one of three ways:
- Judgment – A civil court issues a judgment against a defendant. The plaintiff is then able to file a property lien against the defendant. Some states make property liens automatic in money judgment cases.
- Consensual – A consensual lien originates from an agreement between two parties. The lien on your home is an example. By agreeing to borrow money from your lender, you also agreed to allow the lender to place a lien on your property.
- Statutory – Statutory liens originate from legal statutes. For example, unpaid taxes automatically trigger liens placed on property by the taxing authority.
The thing that makes the judgment lean so unique is that it cannot be imposed without an actual judgment. Indeed, this explains why some creditors take debtors to court over unpaid bills. They want the ability to place judgment liens on debtor property because it is the only way they feel they have a chance at getting paid.
Property Lien Scope
Next up is property lien scope. Consensual and statutory liens are very specific. Let us go back to your mortgage. The lien placed on your home by your lender applies only to your home. Your bank cannot go after your car or your collectibles should you default on your mortgage.
Judgment liens can be more general. While some states mandate that judgment creditors identify specific pieces of property they want to attach liens to, most states allow creditors to go after all sorts of non-exempt property with a judgment lien. A judgment lien could be used equally against a piece of real property and a debtor’s bank accounts. Specific liens are not required for each one.
Enforcement Priority
Last but not least is enforcement priority. When more than one lien exists on the same piece of property, they are arranged by priority. Unfortunately, judgment liens are prioritized based on when they are filed. A judgment lien against an already mortgaged property would take second position. This means that the debtor’s mortgage lender would get first dibs on payment when the property is sold.
Note that judgment liens are always inferior to tax liens. In fact, tax liens have super priority in every scenario. That means they always take first position. On the other hand, judgment liens can take priority over mechanics liens under certain circumstances.
It turns out there is more to the property lien than meets the eye. If you are trying to collect an outstanding judgment relying mostly on judgment reasons, you may be facing an uphill battle. Would you let us take a look at your judgment? If we can help, we would be happy to make you an offer you can either accept or turn down. Contact us to collect your unpaid judgments today.