Winning a court case involving a monetary award turns a plaintiff into a judgment creditor. Enforcing the court’s decision becomes a matter of judgment collection. And sometimes, a good strategy for moving forward with collection is to utilize judgment liens against personal property.
How judgment liens are utilized depends on state laws. Given that most civil lawsuits are addressed at the state level, the rules can be different from one state to the next. Therefore, it is not possible to provide specific details in this post. What you are about to read regarding judgment liens is general in nature. If you have any questions about what your state does and does not allow, do some research.
The Purpose of a Lien
The purpose of a lien is to establish a legal financial interest in someone else’s personal property. When you purchased your car, the lender filed a lien against the car’s title. That lien gives the lender a financial interest in the car, an interest that remains intact until the loan is fully repaid.
Let us say you trade in the car for a new one. The dealer agrees to pay off your existing loan to get you into the new car. Funds are sent to the lender, the loan is satisfied, and the lien is then dropped.
Judgment liens work in a similar fashion. A judgment creditor places liens on the debtor’s personal property. The liens remain intact until the judgment is satisfied. If the debtor hopes to sell or otherwise transfer the attached property, any proceeds must go toward paying the judgment. This prohibits a debtor from giving personal property away – even to friends or family – to avoid paying.
What Types of Property Can Be Attached
Personal property is generally the target of a judgment lien. However, liens can be filed even against businesses and nonprofits with active judgments against them. The big question is, what types of property are subject to liens?
When the judgment debtor is a business or nonprofit, the sky’s the limit. Any and all business assets are up for grabs. But when the debtor is an individual, judgment liens tend to be limited to personal property. That could mean:
- Real estate
- Collectibles
- Jewelry and other valuables
- cars, boats, RV, etc.
Remember that the rules differ from one state to the next. For example, judgment liens in Ohio can only be placed on real estate. Ohio law does not allow liens on other forms of personal property.
Effective and Low Maintenance
At this point, you might be wondering why a judgment creditor would utilize liens rather than going for garnishment or writs of execution. According to Judgment Collectors, a Salt Lake City-based judgment collection agency, some creditors prefer judgment liens because they are effective and low maintenance.
They are effective in the sense that attached properties cannot be sold or transferred without addressing the judgment. A debtor cannot simply give away a piece of property free of charge as long as the lien is attached. And if he sells the property, proceeds need to go toward settling his debt first. This is particularly effective because buyers become wary of real estate once they find out about existing liens.
Judgment liens are also low maintenance in the sense that, once they are filed, they don’t require any more action on the creditor’s part. The creditor simply sits back and waits for either payment or sale of the attached property.
Sometimes, liens are the way to go. It is a good thing that most states allow them as a tool for collecting judgments.