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Liens are utilized in the United States to help collect debt. They create real, legal consequences for people and businesses that do not follow through on their financial liabilities, so they are more likely to take steps to pay off their debt. Liens allow the owed parties to have a recourse when collecting debt becomes next to impossible. There are multiple types of liens that are regularly used in the United States. This article explores judicial liens.
The definition of a judicial lien is simply a lien that relies upon a court action to be executed. In other words, documents need to be filed in court and in many cases, a court proceeding is necessary for the lien to exist. The details of the terms of judicial liens depend on State, and sometimes Federal laws but still are only granted through court action. This differs from statutory liens. With statutory liens, just having the laws in place is enough to initiate a lien if the correct steps are taken. Judicial liens do not exist unless a court is involved.
Most judicial liens fall into one of the below categories:
These types of liens go into effect once a judgment has been made about a debt case. The owed party files paperwork about the debt they are owed at its local County, State, or Federal court. There is a hearing for which the owed party and the debtor have an opportunity to go before a judge. This is available in all states, without exception. Once the judge issues a ruling, a lien can begin to be initiated.Many states have an additional requirement that the owed party must record a certified copy of its judgment in a public registry before it becomes a lien on property.
Example: A foreclosure of a property results in the primary mortgage holder getting some of its funds back via the sale of the property. The secondary lender is unable to collect owed funds through the foreclosure process, so they file a case in county court to attempt a judgment against the owed party. If the judgment is granted, it can serve as a lien once all filing requirements that apply to the county have been met.
Garnishment is a forced collection activity. It attaches to the debtor’s money or property via a garnishment or attachment order. This might be seizure of bank accounts or wages. A judgment for garnishment might be issued by a court if the debtor has a history of not following through on debt repayment or if the debtor is likely to leave town. This type of lien stays in effect until the court decides whether the owed party can use the collected funds or property to pay down the judgment or if it is time to release the assets back to the borrower. With wage garnishment, the lien stays in effect until the debt is paid in full, or the garnishment is released for another reason.
Example: A person owes the IRS for their tax liability. They have a record of not paying this on time, and they have accrued debt over multiple years. The IRS goes to court to seek judgment to garnish the debtor’s wages. Through this judgment, a lien is filed against the paycheck of the taxpayer, and the IRS can collect its tax debt as the debtor earns funds.
Currently, 28% percent of all children in the United States live with one parent while the other parent lives elsewhere. These households rely on child support for basic household and child care expenses. Unfortunately, only about 60% of child support is received on schedule. Many individuals owe for months or even years of back child support.In many states, a custodial parent can obtain a lien on the property of the non-custodial parent that owes child support in order to obtain some or all the funds that are owed to them.
Example: A person owes child support and has a history of not paying it on schedule. Other attempts to collect have taken place, including hearings in family and probate court. A judge rules that in order to collect the owed funds, a lien can be filed against their house or car, and the debtor will not be able to sell these without the lien being cleared.
To summarize, multiple types of judicial liens exist, and they all require court involvement, and in some cases, additional filing steps. These liens can help move debt owed in different situations, and there are different options to how the liens will work. They offer additional avenues to the owed parties to pursue in recouping funds owed to them.