What Is a Judgment Lien?

A judgment lien is a court ruling that gives a creditor the right to take possession of a debtor's real or personal property if the debtor fails to fulfill his or her contractual obligations. This lien may be made against an individual or business and allows the creditor to access assets such as the debtor's business, personal property, and real estate to satisfy the judgment.

A plaintiff who obtains a monetary judgment is described as a judgment creditor, while the defendant becomes a judgment debtor.

Key Takeaways

  • A judgment lien is a court ruling that gives a creditor the right to take possession of a debtor's property if the debtor fails to fulfill his or her contractual obligations.
  • Judgment liens are nonconsensual because they are attached to property without the owner's consent or agreement.
  • Creditors must record liens via a county or state filing in most states.
  • These liens can be attached to real or personal property, or—if the debtor has none at the time of judgment—to future acquisitions.

Understanding Judgment Liens

If you owe money to a creditor and don't pay, that party may sue you for the balance. If the court rules against you, the creditor can file a judgment lien against you. A judgment lien is considered a nonconsensual lien. That's because it is attached to a piece of property without the owner's consent or agreement.

In most states, the judgment creditor—the winner of the lawsuit—must record the lien via a county or state filing. 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.

Once a judgment lien is filed with the appropriate authority, it becomes attached to any personal or real property. Personal property refers to assets such as cars, appliances, or furniture. Real property, on the other hand, refers to things like homes and other buildings, or land. The property must be registered in your name, so if you have a debt that goes unpaid, the judgment lien cannot be attached to your spouse's property. If you do not own any property at the time the lien is filed, it can be attached to any future acquisitions—provided the lien doesn't expire.

One downfall 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.

In most states, judgment liens must be filed by the creditor through the county or state.

Special Considerations

There are a few ways you can satisfy or avoid a lien altogether. The first—and most obvious—option is to repay the debt. If you pay off your obligation, the creditor will remove the lien. This is done by filing a release through the same place the lien was recorded—the county or state.

It is possible for you to avoid a nonconsensual judgment lien on a 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 an 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.

Using lien avoidance can be an advantage 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.

Judgment Liens vs. Property Liens

While judgment liens are awarded by courts without the consent of the debtor, property liens are a little different. These liens are permitted by the debtor, who voluntarily gives up the right to his or her property. If you borrow a large sum of money—say for a mortgage or a car—the lender may require a form of security or collateral. That's because the financial risk is too high. In order to complete and fund the loan, the creditor may put a lien on your property. By doing so, the creditor ensures it can foreclose on that piece of property if you default on your financial obligation.

Examples of Judgment Liens

If one person injures another in an accident through negligence, the injured person may decide to sue for damages. If the person affecting 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 secures 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.

Here's another example. A judge may place a lien on a debtor's car for nonpayment of a car loan. 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. If there's a balance left over, the debtor is on the hook for that. This example extends to trucks, motorcycles, or other motor vehicles.