What Is A Judgment Lien?

A judgment lien is a court ordered lien that is placed against
the home or property when the homeowner simply fails to pay a
debt. This doesn't seem like a big deal, but when the homeowner
has a judgment lien against his or her home and wants to sell
it, the judgment lien has to be paid in full before the home or
property can be sold. Judgment liens can be placed against the
property for a variety of reasons such as unpaid credit card
bills, utility bills, department store bills, landscaping or
home improvement bills, and just about any bill that the
homeowner has failed to pay in a reasonable amount of time. Any
bill that can cause one to end up in court can result in a
judgment lien.

A judgment lien is different than a trust, in that the judgment
lien holder cannot foreclose on the home or the property as
trust holder can. Judgment lien holders can demand payment, but
ultimately they must wait for the homeowner to sell the property
before they can expect to be paid the money that they are owed
according to the judgment. Luckily for the judgment lien
holder, the court will typically assign an interest rate to
these liens so that the lien holder is compensated for their
waiting as the interest will continue to accrue until the debt
is paid in full. Because the majority of people will live in
their home for quite some time, the interest can make a
judgment lien grow, and grow, and grow over the years so that
it is quite large. Imagine what a lien of just $3,000 would
grow to over the years if the interest rate were 15% annually
and that would be an even bigger amount if the debt were $5,000
or $10,000!

Of course, judgment liens require court action. A creditor will
take the homeowner to court where the judge will determine if
the homeowner does in fact owe the creditor any money. If the
court decides that the creditor is owed the money, and the
homeowner will not or cannot make payment, the judge will order
that a judgment lien be placed against the property. The
judgment lien will then be entered into land records offices
for the city or county so that the home cannot be sold without
repayment of the debt. Once the lien is filed with the land
records office, the judgment lien is said to be attached to the
property, meaning that it cannot legally be sold without paying
off that lien. If the judgment lien is not listed at the land
records office, then it means that the debt or lien is not
legally attached to the property and does not need to be paid
off to sell the home.

A home or property can have numerous liens against it, which
may present a problem when the home is to be sold. Fortunately,
the law says that liens will be paid off in the order that they
were attached to the property, meaning the first lien will be
paid first, the second will be paid second, and so on. This is
a law that was basically developed for when a home is
foreclosed on. If a foreclosed home is auctioned it will first
pay off the first lien, then the second, and the third until
there is no money left to pay the debts that are still attached
or associated with the home. Of course, all trusts against the
house, such as mortgages and home equity loans, would be paid
off before the judgment liens, so it's not uncommon for these
liens to simply go unpaid because there is no money remaining
to pay these debts after the trusts are paid. If there is not
enough money to pay for all of the judgment liens and trusts on
the home or property, they are then wiped out and can no longer
be collected on. Of course, the auction will usually attempt to
pay for all of these debts, and they are paid for until there is
no money. The reason for this is that the new owner will not be
able to get any home equity loans or second mortgages with
judgment liens already on the home. If there is money left over
after everything is paid off, the remaining amount would go to
the foreclosed homeowner as all debts are paid.

You can look for judgment liens at the land records office,
though you will typically not find them listed with trusts.
Investors or homeowners looking to sell their home will have to
look into both trusts and judgments, as they are listed in
different areas. Investors can often be caught off guard when
they realize how much debt is attached to the home, and sellers
are often startled at old judgment liens that they had forgotten
about and don't want to afford to pay off in order to sell their
home. It's a good idea to go over all of this information before
one bids on a home or attempts to sell it or put it on the
market.

Judgment liens are not something that anyone wants put against
their home, but they are common enough. There comes a time for
many people when they simply cannot pay a bill, and a judgment
lien is ordered. Making a continued effort to pay down the debt
is a great idea so that you don't acquire large interest fees in
addition to the initial dollar amount of the lien. The homeowner
does not have to wait until the home is sold to pay off the
lien, instead they can be paid off as soon as possible. The
judgment lien is simply put in place so that the home cannot be
sold without the debt being paid, and when you look at it from
the creditors point of view, this is a great tool to ensure
that you'll eventually be paid the amount you are owed in
addition to an interest fee that will pay you for waiting.


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