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While liens exist to help lenders collect debt owed to them, the types of liens vary. Each type of lien has a specific set of laws that determine how it is filed, granted, and applied. This article explores judgment liens, or liens that are filed in court, and granted by a judgment. This differs from other lien types in one major way – other lien types can be filed and applied without having to go to court and have the judge rule in one’s favor. Judicial liens are used in cases where the owed amount could be disputed, and / or when the lien is not part of the contractual agreement governing the financial transaction.
Judgment liens fall into the non-consensual category of liens. When borrowers do not agree to the lien as part of their borrowing or sale agreement, the owed party can take them to court to force a lien if the debtor is in default. A judgment lien, if granted, can help influence the debtor to fulfill his or her contractual obligations. Judgment liens can be granted by county or state courts, and many states require the lien to be filed with the county in question after it is granted by the court. These types of liens can be attached to real estate, personal property, or even to future acquisitions.
While the process for obtaining a judgment lien varies from state to state, and county to county, it is most often a three-step process for the filing party. First, the lender must get a money judgment from the court that states that the filing party is indeed owed money. The money judgment will list how much is owed, and by whom. Next, the owed party goes back to court to obtain a lien on the debtor’s property, based on the money judgment. Finally, the owed party files the lien as a public record with the county or state in question. Once the lien is filed, it becomes next to impossible for the debtor to sell titled property without having to clear the lien first.
For debtors, there are multiple ways to avoid having a judgment lien placed on their property. First and foremost, it is important for the debtor to do everything they can to stay compliant with their sale or loan agreement. If it becomes difficult to make payments, the debtor can attempt to renegotiate payments to get to a more attainable place with the lender. As a last resort, the debtor can reach out to the lender when the money judgment is issued, prior to the lien being filed, and attempt to renegotiate or catch up with their payments at that time.
Liens of all kinds should be avoided whenever possible. For the owed party, obtaining a judgment lien can be a time-consuming process, involving legal and court costs. For the debtor, a lien will limit their options when it comes to selling property or assets. Liens are also public records, so their existence can damage an individual or business reputation and credit-worthiness.