- April 25, 2017
- Posted by: U.S. Title Records
- Category: Judment Liens, Lien and Title Search, Title companies
Subject: Judgment Liens
I am trying to sell my property and the title company told me that I have a judgment lien
that must be paid before the sale can close. I have not been sued so how this be true and how
do I get rid of it? Help!
Assuming the judgment is valid, one possibility is that the plaintiff was granted an order
allowing service of the lawsuit by publication in a local newspaper. If a defendant is not aware
of the publication (many are not) and the time to respond to a lawsuit expires, the defendant
has a certain time period to file a notice of default and subsequently apply to the court for a
default judgment against you. In some states, an order for judgment or final judgment
constitutes an automatic lien against your property. However, in most states the judgment
must then be recorded at the County Recorder’s office to perfect the lien against your
property. Also, many owners are not aware that recorded judgments may affect property
acquired after the judgment was obtained. The owner later discovers that a lien exists and
must be paid before the property can be sold and refinanced.
Judgments expire after a period of years, the number of which depends on the state’s relevant
laws. If you are the plaintiff, you may want to ensure you are aware of that expiration date in
the event you want to renew the judgment. If you are the defendant and the plaintiff forgets
to renew or simply chooses not to for whatever reason, you are in luck.
There are several ways to remove a judgment lien. If there is a legal basis and assuming you
are within the court’s time limits, you may have the option of moving the court to set aside the
judgment. However, there are specific criteria that must be proven first, i.e., newly discovered
evidence that would have changed the outcome of the case, fraud, a void judgment, lack of
jurisdiction, wrongfully filed lawsuit, etc. It is a good idea to consult with a real estate attorney
who can evaluate the situation and recommend whether or not there are sufficient grounds to
file such a motion.
If there is no legal basis to set aside the judgment or the court denies the motion for lack of
evidence and the judgment stands, there are several options to satisfy the judgment and
release the lien it created. You may pay the judgment together with statutory interest in full,
but you might first want to explore the potential for negotiating the judgment balance with the
plaintiff/creditor. Keep in mind that if a creditor has information about your employment,
other income or assets, the creditor has the option of collecting the entire balance via wage
garnishment, bank garnishment (multiple bank garnishments if the first one does not pay the
judgment balance in full), rental income garnishment, and/or seizing and forcing the sale of
assets that are not exempt considered exempt. The homestead exemption is one example and
the statutes vary depending on the laws in your state. If the creditor is confident that the
judgment can be executed, there may be less chance to negotiate the judgment balance.
Generally, if you are unemployed, your income is exempt (social security income would be one
example of exempt income), you have little or no money in the bank and/or do not own assets
that can be seized, the judgment creditor has few options and more likely to be open to
negotiation or agreeing to a payment plan providing for payments over time. The latter might
work well in cases where a home sale or other time-sensitive issue is not pending, or you may
be able to convince the creditor to satisfy and release the judgment lien in exchange for a
payment agreement stipulating that the debtor will agree to an entry of judgment in the event
of a default on the payments, the specific terms of which can also be negotiated. Another
factor to consider is whether there will be proceeds out of the sale or refinance. If yes, you
may be able to pay the judgment out of the proceeds as part of the transaction closing. Finally,
you may be able to negotiate a lump sum settlement for a portion of the judgment balance.
Some defendant debtors who meet the qualifications choose to file Chapter 7 bankruptcy to
discharge all their debt, including judgments and debts incurred before the bankruptcy is filed.
However, if you are in the process of selling or refinancing your home, a bankruptcy filing may
place a hold on anything in progress pending the outcome of the bankruptcy. Debtors who
meet the qualifications to file a Chapter 13 bankruptcy providing for payments on all your debt
directly to the bankruptcy court trustee assigned to your case. However, again, if a sale or
refinance of your home is pending, this may cause a delay, so it is important to obtain legal
advice so that you can make an informed decision.
Once the judgment balance is deemed paid in full, the creditor should satisfy and release the
judgment lien. Depending on the laws in your state, this may mean simply filing a satisfaction
of judgment with the court, but in most states, a release would also have to be recorded with
the County Recorder’s office. Unfortunately, not all creditors take the time properly satisfy
and release the judgment, so it is a good idea to follow up with the creditor and ensure that
you receive copies of the documents with the court and recorder’s stamps. If you have those
documents in your files, you will be ready if you need to correct a credit bureau reporting or
present to a title company