DEFINITION of 'Judgment Lien'

A judgment lien is a court ruling that gives a creditor the right to take possession of a debtor's real property if the debtor fails to fulfill his or her contractual obligations. A judgment lien may be made against an individual or business and allows the creditor to access the debtor's business, personal property and real estate, among other assets, to pay the judgment. A plaintiff who obtains a monetary judgment is described as a "judgment creditor,” while the defendant becomes a "judgment debtor."

BREAKING DOWN 'Judgment Lien'

The creations of judgment liens can arise through a wide variety of circumstances. For example, if one person injures another in an accident through negligence, the injured person would likely sue for damages. If the person who affected the accident’s insurance does not cover the injured party’s required reparations, a judgment lien may be placed against the negligent person's property. The creation of this judgment lien would secure payment of the claim.

If the debt is not paid, the judgment creditor has the authority to take additional steps. These could include seeking enforcement of the judgment by garnishing wages and potentially seizing a bank account.

A danger to liens on personal property is that a large portion of personal property has no title; therefore, liens are not officially recorded, and personal property could be sold off to a third party, who is unaware of the lien’s existence.

A judge could also place a lien on debtor's car, as a second example. In this scenario, if the debtor does not pay his or her creditor within a certain time period, the car would be used to pay off the remaining debt. This example extends to any truck, motorcycle, or other motor vehicle owned.

In most states, the judgment creditor must record the judgment via a county or state filing; however, in a few states, if a court enters a judgment against a debtor, a lien is automatically created on any real estate the debtor owns in that county.

Avoiding Judgment Liens

It is possible for one to avoid a nonconsensual judgment lien on property or vehicle in bankruptcy (deemed “lien avoidance”) if the following conditions hold true:

  • The lien must have been derived from a court-issued money judgment
  • The judgment debtor must be entitled to claim exemption in at least some of his or her equity in the property
  • The lien would result in a loss of some or all of this exempt equity if the real estate or vehicle was sold

It can be advantageous to use lien avoidance if and when available. This can be particularly beneficial if a lien can be fully wiped out although still helpful in the case of partial lien avoidance.

RELATED TERMS
  1. Judgment

    A judgment is a court order to the loser of a lawsuit to pay ...
  2. Voluntary Lien

    A voluntary lien is a contractual agreement made at the assent ...
  3. Home Lien

    A legal claim placed on a home is called a home lien.
  4. Federal Tax Lien

    A federal tax lien is the U.S. government's right to keep a person's ...
  5. Stipulated Judgment

    A Stipulated Judgment is a court decision ordering a debtor to ...
  6. Prior Lien

    A lien that is a recorded lien prior to any other claims.
Related Articles
  1. Taxes

    Investing in property tax liens

    Investing in property tax liens can be a viable option for experienced investors who are familiar with the real estate market.
  2. Personal Finance

    How to Sell a Car With a Lien

    Vehicle owners wondering how to sell a car with a lien on the certificate of title have four options to both remove the lien holder and transfer ownership.
  3. Investing

    Attention Home Buyers: Why You Need a Lawyer

    Property transactions are complex and subject to specific state/local rules. Hiring a lawyer can simplify the process.
  4. Financial Advisor

    Build A Wall Around Your Assets

    Learn how to protect your money from lawsuits, creditors and other judgment proceedings.
  5. Taxes

    How To Negotiate Back Taxes With The IRS

    Recently, the IRS has been more amenable to working out late tax payments. But you have to address the problem up front, and don’t keep Uncle Sam waiting on his tax money.
  6. Personal Finance

    Spotting Credit-Repair Scams

    Credit repair scams are common in today's debt-reliant world. Don't be a victim!
  7. Personal Finance

    Top 5 Books to Become a Forex Trader

    These books are some of the best resources to learn about forex trading, covering everything from the basics of currency trading to advanced trading strategies.
  8. Personal Finance

    Car Title Loan Requirements

    Here's a list of what you need to qualify for a car title loan. Most important: having sole ownership of your car with no liens.
  9. Insights

    3 Reasons Banks Can Freeze Your Account

    Learn about the reasons why a bank account can be frozen. Discover if it is legal for creditors to freeze your account and withdraw money.
RELATED FAQS
  1. Lien vs Encumbrance: What is the difference?

    An lien is an encumbrance, but not all encumbrances are liens. Learn about the distinction between these two property rights ... Read Answer >>
  2. How long does it take for items to show up on my credit report?

    Find out how long missed payments, collections and requests for credit take to appear on a credit report and how often creditors ... Read Answer >>
Trading Center