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Objective information on small claims judgement collection

Judgment Liens

So, you took your dispute to small claims court and won. The positive outcome validated your position and made you feel like King or Queen of the World! As it turns out, you were only a monarch for a day. Now comes the hard part — it’s time to collect. You’ve followed your state’s procedures for asking the other party to pay, waited the prescribed time, and still no payment. You’ve been reasonable, maybe even friendly, about the whole situation. But now your patience is running thin. You’re ready to take action, but aren’t exactly sure what kind of action to take. One popular option is to obtain a judgment lien.

What exactly is a judgment lien?

Merriam-Webster defines a lien as “a charge upon real or personal property for the satisfaction of some debt or duty ordinarily arising by operation of law.” In other words, a lien is a way for someone to make sure a debt is paid, by attaching an interest to a piece of property owned by the debtor.

A good example of a lien is a home mortgage. In most states, a mortgage creates a lien on the mortgaged property. The homeowner voluntarily grants the lender an interest in the property (the lien) in order to obtain the mortgage loan to buy the home. The homeowner agrees to repay the loan in regular installments, and once the loan is repaid in full, the lender’s lien is removed from the property. However, if the homeowner fails to make the payments as agreed, the lender is entitled to foreclose its lien and sell the property to recover the amount remaining to be paid on the loan.

A judgment lien, then, is any lien placed on a defendant's assets as a result of a court judgment. However, unlike a mortgage, there is nothing voluntary about a judgment lien. When you won your case, you became the judgment creditor, and the other party became the judgment debtor, on the amount of money the court awarded to you. If you won a money judgment in small claims court, then you are likely entitled to a judgment lien.

How does a judgment lien work?

In most jurisdictions, judgment liens are applied only to real property, not personal property. The lien alone will likely not entitle you to sell the property in order to collect your money from the judgment debtor. However, depending on the jurisdiction, the lien will either completely prevent the debtor from selling or mortgaging the real property until the judgment is paid or expires, or show up on a title report as an encumbrance that will be transferred to the buyers upon sale, thereby discouraging any sale of the property. Once created, the judgment lien typically attaches automatically to any property acquired by the debtor thereafter in the county where the lien was filed. A judgment lien terminates if:

  • 1) The underlying judgment is satisfied;
  • 2) The judgment creditor files a release of the lien; or
  • 3) The lien expires at the end of its statutory lifetime.
  • How do I get a judgment lien?

    That depends on: 1) Your particular jurisdiction; and 2) Whether the real estate is located within the county of the court where the creditor obtained a judgment.

    If the debtor's real estate is located in the same county as the court issuing the judgment, then, in most states, a judgment lien on that real estate is created as soon as the court clerk enters the judgment. In some states, the lien is created even earlier, at the moment the judgment is granted. However, in order to protect real estate buyers, there is a trend towards requiring judgment creditors to record the lien in the title records of the county where the real estate is located to “perfect” or make the lien known to 3rd parties who may want to buy the property or lend money using the property as collateral.

    In states where recording the lien is required, the process usually involves: 1) getting a copy or “abstract” of the judgment from the court that entered it; 2) going to the Clerk and Recorder’s Office in the county or counties where the judgment debtor owns the real estate and recording the judgment; and 3) advising the judgment debtor that he or she will not be able to sell or mortgage the real estate until the debt has been paid and you release the judgment lien.

    It’s important to be aware that judgment liens don’t last forever. Just about every state has a statute that limits the amount of time a judgment lien will continue to affect a property, usually somewhere between 5-10 years. If you are unable to collect your judgment during that time, the lien will expire. However, most states also have a procedure for renewing the lien. Some jurisdictions will only allow you to renew it once, while others will allow as many renewals as necessary.

    Summary

    A judgment lien can be an effective option for collecting a small claims debt. It allows you to encumber the debtor’s real property, putting additional pressure on him or her to pay off the judgment. It can also be a step towards obtaining an execution lien or writ of execution, which will allow you to seize the debtor’s property and sell it to satisfy the judgment. Keep in mind that each state has its own laws so you need to be familiar with the procedures in your state. For more information on writs of execution, see our article on the subject. The judgment lien process is not fool-proof and requires a fairly substantial investment of time. The best option is to try your best to maintain a relationship with the debtor so hopefully you can work out a payment plan that will work for both of you. This is especially true if the debtor is someone with whom you hope to maintain a working or friendly relationship in the future. Obtaining a judgment lien is an adversarial process and will likely bring any such relationship to an end.

    More articles and resources about judgment collection & enforcement, judgment law, and how to collect a legal judgement

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    Tip of the Week

    September 27, 2010

    If you have been awarded a judgment, waited the 30 days required, sent a demand letter giving the debtor a time limit for paying his/her debt; what should you do if you still have no money? You know that the court can do little, but before you take steps to garnish wages or bank accounts, consider suggesting negotiation or mediation if the debtor gives any impression that they want to settle the matter.

    More tips...

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