Property liens are among a litany of tools judgment creditors have at their disposal to collect money owed. They represent a very persuasive tool as well. Facing a property lien can Be all the motivation a judgment debtor needs to find a way to pay up. Unfortunately, a property lien does not always do the trick.
There are other options when judgment debtors pay no mind to property liens. But they are another topic for another post. In this post, we will take a deep dive into property liens and how they can be used to satisfy an outstanding judgment.
Establishing a Financial Interest
Property liens are not unique to judgment collection. If you have a mortgage on your house, you are already subject to a lien filed by your mortgage lender. That lien establishes a legally recognized financial interest in your home and the land it sits on. But what does that mean?
A property lien establishes a legal ‘hold’ on the property until your mortgage is fully paid. Should you decide to sell, or otherwise dispose of the home, a portion of the proceeds would go toward paying your outstanding balance. Ownership cannot be transferred until the balance is paid.
Property liens work the same way in judgment collection cases. The judgment creditor establishes a legal interest in the debtor’s property, thereby preventing that property from being sold or otherwise disposed of without paying the outstanding debt.
Two Categories of Property Liens
State laws regulating property liens can differ quite a bit. That being the case, most types of property liens leveraged in judgment collection cases fall under one of two categories:
1. Real Property
Real property constitutes things like homes, hunting properties, vacant lots, etc. If something is real estate, it is considered real property. Most states allow liens against any and all real properties a judgment debtor owns in the county where the judgment is recorded.
In some states, judgment creditors can also file liens against future property. In other words, a lien might apply to a piece of property the debtor currently owns as well as any future properties he might purchase in the county.
2. Personal Property
Personal property is anything other than real estate. Think of things like vehicles, collectibles, art, and jewelry. Many states allow liens against personal property, liens that would effectively do the same thing: prevent the debtor from selling or otherwise disposing of the property without satisfying the debt.
Other Things to Know About Property Liens
As a tool for collecting outstanding judgments, property liens can be very persuasive. But according to Judgment Collectors out of Salt Lake City, UT, they are not always the best way to go. Why?
First, property liens may not be perpetual. Some states place statutes of limitations on property liens. The average in states that do is 7-10 years. But that’s not all. Certain types of property are exempt in a number of states.
For example, some states do not allow judgment creditors to go after a person’s primary residence. Other states allow liens against a primary residence but protect a certain value of the home against collection. Judgment creditors always n need to be cognizant of exempt properties.
Finally, judgment liens I prioritized based on the date they are filed. Earlier liens on the same property take precedence over later ones. So filing a property lien in a third or fourth position will likely be of little value unless the property in question is extremely valuable. But property liens are still an option for judgment creditors in most states.
