Many people have liens on their home properties, connected to some debt waiting to be paid. Consider your mortgage — a voluntary, recorded lien you agreed to have placed on the home as collateral for the loan. There are also involuntary liens, such as those imposed on your property after a court action. These judicial liens, or judgment liens, can attach to real estate. Individual states regulate both voluntary and involuntary liens.
Once a final judgment is entered against the debtor, and the opportunities for appeals have been exhausted, the creditor (or its representative) can follow the appropriate timeline to record the certified original Notice of Judgment Lien with the register of deeds in the debtor’s home county.
A lien should be:
This filing does not need to state a specific property’s legal description; it should identify the debtor by the last four digits of a social security number or tax identification number. Consult your state’s Judgment Lien Act for all further details.
The creditor keeps a signed copy. A signed copy is served on the judgment debtor by certified mail. Expect certification and recording fees and, for large liens, a fee for personal service by a process server.
While it’s the person who is served with the notice, the lien attaches to the property itself, becoming a cloud on the title. Thus, the lien is on the property, not its owner; but in reality, homeowners must pay off the judgment lien to offer clear, marketable title to any future owner. Recorded judgment liens show up in searches of land title records under the property owner’s name until they’re paid off.
As an example, here’s Michigan’s provision with the precise details, including the five-year life of the lien, the requirement for filing and certification of a single possible 5-year renewal by the original court, and re-recording with the register of deeds 120 days before expiring.
Courts order payment to prevailing parties in cases involving debts, damages, or family law obligations — for example, to ensure the payments of spousal or child support.
If you’re sued and a judgment is entered against you in a court, the court order can be recorded as a lien on your house. What’s next? Can a homeowner lose the home to the creditor?
In reality, unless it’s a mortgage debt, a lien is very unlikely to result in the loss of the home. As we’ll see below, protections exist for homeowners facing unplanned, involuntary liens such as those imposed in court.
By recording a support award, a court creates a judgment lien on property of the person who must pay support money. Now what’s next? The person facing a lien for spousal or child support might have moved out of the marital home. Will this new lien ruin the chances of approval for a mortgage on a new home?
No. It’s simply an administrative record, and it can happen automatically under a state’s marriage dissolution law. As long as the support is paid as directed, it will not dent the payer’s credit score or mortgage qualification — although the mortgage applicant should disclose it, and the lender will consider it one of the home buyer’s ongoing financial obligations.
Homes saddled with involuntary judicial liens have several shields — mainly, a number of heavy bureaucratic burdens for creditors:
The debtor could scuttle the sale by filing for bankruptcy, too. In any case, debtors get a six-month window post-sale to redeem the house for the amount the buyer paid plus interest. Once recorded, a certificate of redemption invalidates the sale.
Finally, many creditors just don’t want the bad PR that comes from taking people’s homes. So, the creditor is unlikely to try to seize the house or attempt a foreclosure. If wage garnishment isn’t an option, expect the creditor to record the court order, impose the lien, and wait. The debtor has to resolve the cloud on title before refinancing or conveying the home to anyone else.
Which takes us to…
The debtor may discharge the lien through a bankruptcy case or commit to resolving the debt.
The creditor must file a release document in the county where the lien was recorded if the debtor:
As noted, when the debtor wants to sell, liens must be resolved. If the homeowner’s equity cannot cover the whole judgment, the creditor should record a partial discharge on the specific property being sold. The seller should ensure accurate, full, and timely disclosure to the creditor on the sale proceeds and the available equity.
If the seller fully satisfies the judgment, the creditor must timely discharge the full lien, or owe penalties. Meanwhile, the debtor may file an affidavit and evidence of payment to the title company.
Be sure the release, signed by the creditor or its representative, is recorded, extinguishing the lien.
Pro tip: Buying a foreclosed home? Your purchase process will extinguish various liens. Yet the title search can still bring up stragglers — sometimes senior to the lien being foreclosed on.
Do judicial liens take priority over other liens?
Judgment liens have priority over non-tax liens recorded later. States do make exceptions — for example, to protect loans taken out to refinance already ongoing mortgages, or seller-financed mortgages.
Can the creditor collect from the debtor’s property in a different county?
No. A creditor can only collect on a judgment lien if the debtor actually owns property in the county where the lien is recorded. This is why creditors ask credit applicants to state whether they own or rent their primary homes.
Can the creditor place multiple liens, then — to reach a person’s property in multiple counties?
Yes. If the debtor could have multiple (or future) properties elsewhere, then the creditor can have a copy of the judgment recorded in multiple counties. Otherwise, any payoff would be capped by the debtor’s equity in a single property — and that’s only after taxes, liens with higher priority, and closing costs are resolved.
Future properties? A creditor can place a lien on a home the debtor doesn’t even own yet?
That’s right. The lien, until it expires, could attach to property the debtor acquires later. So, if the debtor has no real estate when the lien is recorded, but later acquires real estate in a county where the lien exists, the lien will attach to it.
A judgment creditor can’t touch a trust, right?
A judgment creditor probably can place a lien on real property held in a revocable trust. An irrevocable trust could provide more protections under state law.
If the judgment is against a beneficiary, the creditor can go after money once it’s distributed to that person.
For case-specific and state-specific information, consultation with tax, real estate, and legal professionals is essential. At Deeds.com, we are dedicated to providing high-quality, up-to-date information for a general readership, and carefully curated, easy-to-use forms. Please note that neither this website nor any other should be taken as a replacement for individualized tax and property law advice.
Photo credit: Bill Oxford, via Unsplash.
