Not everyone who owes money pays on that debt. The creditor who is owed the money, whether an individual or a business, may decide to look for ways to ensure repayment of funds. One option may be to place a lien against the debtor’s real property.
Getting a Judgment
For an unsecured creditor who is not a contractor that performed work on the home, the first step that must be taken is getting a judgment against the debtor. Someone who is owed money is generally not able to just put a lien on property without first securing a judgment. Securing a judgment requires the creditor to sue the debtor. This may be through circuit court in many jurisdictions. If under a certain dollar amount, this suit may be through the small claims court. Getting a judgment requires convincing a judge or jury that the individual or business owes the funds. This may require showing a written contract that was agreed to by the defendant if there was one or the validity of an oral contract.
Individual creditors may have to worry about particular defenses. For example, the statute of fraud requires certain contracts to be in writing. If the contract was only oral, this defense may defeat the claim. The statute of limitations provides a time limit by which a claim must be asserted. If the creditor has waited too long, he or she may not be able to get a judgment against the debtor.
Finding Assets
After a judgment is secured, the debtor may then be able to look into the assets that the debtor has. In many states after a judgment is secured, the debtor is required to complete a form that lists his or her assets. In states that require this form, there may be certain ways to get out of completing it, such as satisfying the judgment by paying what is owed or filing a timely appeal. This form is then provided to the individual who won the judgment. If the judgment debtor fails to complete this form, some states allow a mechanism in which a debtor can be forced to show up at court and answer questions about his or her assets.
Real Property Liens
Once a person’s property is discovered, a judgment creditor can take action toward the property. He or she can place a lien against the real property that the debtor owns.
Some states will automatically impose a lien on the judgment debtor’s property once the judgment is secured. However, most states require the judgment creditor to record the judgment with the county to create a lien on the debtor’s real property.
Creditors can attach a property lien that states that the creditor is owed money. Until the debt is repaid, the title will be unclear. The property owner will not be able to sell the property or have it refinanced while a lien is against it. When the judgment debtor tries to sell the real property, he or she will be unable to finish the sale while the title is clouded. In order to sell the property, the debtor may decide to pay the judgment creditor off. The same is usually required to refinance the home. In most states, a portion of the debtor’s property is exempt.
Acquiring a Lien
Before a person can get a judgment lien, he or she must usually wait for the time to appeal to lapse. Once this time has passed, the judgment creditor can acquire an abstract judgment form from the clerk’s office at the court where the case was heard. This abstract of judgment is taken to the county recorder’s office in each county where the real property is located. This effectively records the lien. The judgment debtor should also be notified. The property lien is in effect until the debt is repaid or the judgment expires. In many cases, the judgment remains for ten years.
In some situations, a creditor may request a writ of execution to foreclose on the property. Mortgage payments have priority over payment on liens. If a creditor forecloses on the property, the mortgage has to be paid off before the lien is. To avoid these complications, many creditors decide to wait until the property is sold to receive the portion that is owed to them.
Mechanic’s Lien
A specific type of lien that certain creditors may be able to acquire is a mechanic’s lien. These are filed by contractors and subcontractors who perform work on real property or improve the property. The contractor can file a mechanic’s lien if the property owner did not pay all of the amount owed to the contractor.
Understanding the different types of liens and how they are acquired can be complicated. The attorneys at James Brown law are experts on real property and all of the laws that surround it. We are happy to answer any questions or provide clarification on property liens and judgments. Give us a call at 561-838-9595 or email us at info@jamesnbrownpa.com for a free consultation!
Source: HG.org
