Judgment Liens: What They Are and How to Remove Them
A lien is essentially a claim put on a piece of property owned by someone else. For example, when a party takes out a loan to purchase a house or other piece of property, they sign a contract agreeing to pay back the debt they owe. Due to the amount being borrowed by the purchaser, which is typically an amount larger than a normal purchase, the creditor requires some form of security in the event the debtor stops paying back or defaults on the debt they owe.
Types of Liens: Standard and Judgment
A standard lien is a lien most commonly entered into on a volunteer basis, as part of a contract or agreement when making a large purchase that requires a loan. As stated prior, these liens are included as part of a purchase agreement, acting as a security blanket for the creditor; if the debtor (party requiring the loan for the purchase) stops paying the loan, a lien allows the creditor to reclaim the property as their own.A judgment lien is typically applied as a condition of a court ruling; if a debtor stops making their agreed to loan payments, a court can rule a judgment lien on the property as a way to ensure the debtor continues to pay off the loan. The creditor must typically obtain a judgment against the debtor, typically in the form of a lawsuit, before a judgment lien can be put on a piece of property. A judgment lien is considered a "cloud" on a property that must be cleared or extinguished before a property can be refinanced, or before other financial actions can be carried out on it. Judgments against a debtor are a lien against all his real property in the State.
How to Remove a Judgment Lien
Judgment liens can be removed from an affected property in a few ways, including:
- Paying Off the Amount Owed
- Asking the Court to Remove the Judgment Lien
While paying off the existing amount owed may seem like the obvious solution, it really depends on the situation. A party who is interested in paying off an amount due on a judgment lien can consult the holder of the lien to try and reduce the amount owed, or seek third-party help to work out a manageable payment plan going forward. It should be noted that a full amount due should be asked for from the holder of the lien; oftentimes court and collection fees are considered part of the total amount due and must also be satisfied to get the judgment lien removed.Asking the court to remove the judgment lien on the affected property is also an option, although it depends on the state that the property is in and nature of the property that the judgment lien applies to. Asking the court doesn't always guarantee that the judgment lien will be removed or extinguished either; the decision to remove a judgment lien by request depends on a variety of contextual factors that will affect the court's final decision.
Some Things to Remember
Always research the laws of the state and municipality where you live. A New Jersey judgment lien and Texas judgment lien will have different caveats2, 3 and specificities that will affect their ability to be removed or extinguished. Additionally, financial situations differ from party to party; what's applicable for one individual may be completely different for another. If you or someone you know needs help finding out about judgment liens on a property, there are resources that provide extensive search capabilities for judgment liens that exist in certain states.If there is ever any question as to the status of or situation surrounding a judgment lien, an attorney or financial professional should be consulted to shed more light on the options available for removing or extinguishing a judgment lien.
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