What Is a Judgment Lien?

A judgment lien is a court-ordered lien placed on a debtor’s property to satisfy debts owed to a creditor. There are multiple reasons why a lien might be placed on your property, and several ways in which this lien can be repaid.

Definition and Examples of Judgment Liens

A creditor may petition in court for a judgment when a debtor fails to repay their debts. A judgment will be issued that will force the debtor to pay off this money if the court makes a decision in the creditor's favor.

The court does not collect the funds on the creditor’s behalf when a judgment is issued, but it does issue orders that allow the creditor to immediately begin collecting the debt. A successful creditor can use multiple tools to do so, one of which includes filing a lien against your property.

Once it’s approved, a judgment lien puts a lien on your real or personal property. This may include your home or any personal property you own, such as a vehicle. Once the lien has been created, you won't be able to sell or refinance your property without paying the debt, including the interest.

A creditor can instead attempt to foreclose on the judgment lien if they don't want to wait for you to sell your property. This means you’ll be forced to sell the property to repay the debt.

There are other ways in which a creditor may try to reclaim funds from you in addition to a judgment lien, including garnishing your wages or collecting money from your bank account.

Judgment liens can be removed for several different reasons. This includes paying off the debt, petitioning the court for removal, or filing for bankruptcy.

• Alternate definition: A judgment lien places a hold on your real or personal property in order to collect on a debt.

How a Judgment Lien Works

Let’s say that you opened a credit card to finance the installation of a pool. You and your partner were confident you’d be able to pay off the card before it began accruing interest because it came with a promotional 0% APR offer.

Then your partner lost their job several months after the pool was completed. You were still able to make minimum payments on the credit card, although money was tight. The possibility of paying it off without interest was slimmer, but you were still current on your debts.

A few months later, you also lost your job. You still received enough unemployment benefits to make your mortgage payments and buy groceries between the two of you. But other debts? Those were left behind.

You find out that the credit card company has petitioned the court for a judgment for your debt. Not only do you owe money on the card for the pool, but you’ve accrued plenty of interest and fees for nonpayment as well.

The court ends up ruling in the creditor’s favor, but collecting the debt is tough. Neither of you have money, after all.

The credit card company can then ask for a judgment lien against your home, which has accrued a lot of equity since you bought it. The court rules in the creditor’s favor and a judgment lien is granted against your real property as a result.

The credit card company may force you to sell your home to pay off your debt once a judgment lien is placed against it.

What Does a Judgment Lien Mean for You?

Work with your creditor to come to an agreement for your debt if you end up with a judgment lien on your real or personal property. Along with forcing a foreclosure on your home, a judgment lien allows a creditor to have your personal property publicly auctioned off.

All these options take time and money, which a creditor may not be interested in spending. Negotiating with them to create a repayment plan may be a suitable option in this case.