If a homeowner fails to repay a debt, the court may place a lien on the home or property. What this means is that the homeowner needs to pay the amount stipulated in the order before he can think of selling his property.
Judgment liens can be placed against the property for different reasons such as unpaid credit card bills, utility bills, department store bills, landscaping or home improvement bills, and just about any bill that the homeowner has forgotten to pay after a certain period. Any unpaid bill that the individual ignores can result in a judgment lien.
A judgment lien is different from a trust. The holder of the judgment lien is not able to foreclose the home or the property as a trust holder can. Judgment lien holders can ask for payment, but in the end, they must wait for the owner to sell the property before they can be paid the money.
Fortunately for the judgment lien holder, the court will frequently bestow an interest rate to these liens so that the lien holder is compensated for the time they spend waiting for payment. The interest will continue to grow until the debt is paid in full. This is a risk that the homeowner needs to manage. Because some homeowners will undoubtedly continue to live in their home for a time, the interest can make a judgment lien’s value increase over the years.
A judgment lien will definitely require the homeowner to go to court. The creditor will let the judge determine if the homeowner does owe the creditor a certain amount of cash. If the court decides that the creditor’s claim is valid and the homeowner refuses to pay the money, the judge will put a lien on the property.
State records will document the lien and this will ensure that the property will not be sold until the lien is removed and the debt is paid.
A home or property may have different liens against it. These liens have to be removed one by one before the owner can finally sell the house. According to the law, liens should be paid off in the order that they were attached to the property. This law certainly applies when a home gets foreclosed.
If a foreclosed home is auctioned off, the owner needs to first pay off the first lien, then the subsequent ones. Of course, all trusts against the house, such as mortgages and home equity loans, would have to be paid off before the judgment liens.
More often than not, the liens are simply left unpaid because the money was spent paying for the trusts on the property. The auction will usually attempt to pay for all of these debts, as the new owner will not be able to get any home equity loans or second mortgages when the judgment liens are attached to a property.
You can find judgment liens at the land records office, but you will not find them listed with trusts. Investors looking for properties to buy or homeowners who want to sell their home will need to check both trusts and judgments. Investors should be careful not to get stuck with a property with too much debt still attached. It is a good idea to check everything about the property before shelling out the money to purchase it.