Illustration of judgment lien with cash over a photo of a construction site

When a contractor successfully forecloses on a mechanics lien or wins any civil lawsuit, they walk out of court with a judgment. But their work isn’t done — they still have to collect the money. A judgment lien is a legal tool that a creditor can use to enforce their right to payment as a claim on the debtor’s property, giving them more options when it comes to getting paid. Here’s how a judgment lien works — and how to use it to collect what you’re owed. 

Related: Types of property liens and how they work

What is a judgment lien?

A judgment lien is the result of a civil lawsuit in which the court grants the creditor the right to sell the debtor’s property to collect the amount owed. When a court judgment is filed with the county recording office, it becomes a judgment lien and attaches to any property the customer currently owns, as well as property they may own in the future. Judgment liens help ensure that debts are paid by potentially forcing the sale of personal or real property to satisfy the debt.

When a contractor or supplier files a mechanics lien for non-payment, they can foreclose on that lien in court. If they win their case, they are awarded a judgment lien against their customer’s personal or real property. 

How to collect after you receive a judgment

Winning your foreclosure or other civil suit doesn’t mean you’re walking out of court with a briefcase full of money. As Thea Dudley writes in her book, The Credit Overlord’s Guide to Credit & Collections:

Cover image of The Credit Overlord's Guide to Credit & Collections

Here is a news flash that doesn’t really hit you until you have been to the rodeo a few times and get hit with the proverbial court win aftershock. This comes after the euphoric high of winning your court battle, are free and clear of the appeal threat, and have your newly minted judgment in hand. 

Yay YOU! You won! 

But winning the court case does not mean you will be handed the funds.

This realization hits you like that next day hangover. You realize that the real games are just beginning. You won, but you still must get the debtor to let go of the money. 

A judgment is powerful, but you still need to follow the steps to turn it into a judgment lien — and then use the debtor’s property to recover the funds.

The more you know about your customer, the easier it is to collect on a judgment. “Make sure you have good contact information,” says E. Aaron Cartwright, III. Defense is the best offense — and a thorough prequalification process is the best defense when it comes to collections. “Have the evidence. Have pictures. Have documents. Have conversations,” says Cartwright.

The process of filing and collecting on a judgment lien varies by state. Laws must be followed or you could lose your right to collect payment. Not all states allow judgment liens on personal property, so be sure to check the laws that apply in your area before filing a lien.

File your judgment

Once a judgment has been handed out by a court, a judgment lien can be recorded with the county that the lawsuit was filed in. In some states a judgment lien is filed automatically, but in others the creditor must file the document after the judgment has been finalized. The lien is recorded in the county clerk’s office and must specify the amount owed and provide a description of the property that the lien is to be attached to.

“The first step after receiving the judgment is to reduce it to a judgment lien to protect any priority interests,” says Susan White, an 11-year veteran of construction law. “Contractors can then avail themselves of all collection remedies including attaching bank accounts (trace the financial institution from any previous payments received), tagging equipment, and even foreclosure of real property. Know your state’s requirements — some states require the judgment lien to be recorded in each county wherein the debtor owns property.”

View county recording offices in every state

If the creditor doesn’t want to wait for a sale or refinance of the property, they can execute on the judgment lien by filing a lawsuit for foreclosure.

This forces the sale of the property by the local sheriff, with proceeds going to pay the lien debt. It’s important to note that judgment liens get paid only after mortgages and other liens have been satisfied, which could mean that the creditor won’t get paid, even if the lien is executed.

“I have hired private investigators to stake out homes and offices and follow the debtors’ trucks in the morning to find out where they are working.”

Joseph Katz, Maryland construction attorney

Get a Writ of Execution

After a judgment of possession is rendered by the court, the judge may then issue a writ of execution to begin the transfer of property. The judgment for possession states that the creditor has a right to the property; the writ of execution actually begins the transfer process from a judgment debtor to the creditor.

Once the court grants the order directing the sheriff to seize the judgment debtor’s property, they will sell it and release the funds to the creditor to be applied to the debt.

“There is no sweeter sound than the sound of a sheriff’s voice on the other end of the phone letting you know they have tow trucks on the way to hook up vehicles from said debtor, or that they just posted notice on a property for a sheriff’s auction,” Thea writes. “That is a classic trigger point: it was really hard to get to, but we found it.” 

Using a Writ of Garnishment

A judgment lien can also be used to garnish the debtor’s wages. 

“A writ of garnishment is another collection tool that can be used with a judgment,” writes Thea. “You or your attorney will need to file paperwork with the court that allows for the property, wages, or money owed be collected by a third party, usually the sheriff, and be applied to the amount owed to the judgment creditor.”

“If you know the debtor is working and making money, that money belongs to you, but you need to be proactive to make it yours,” says Joseph Katz, a construction attorney in Maryland for 15 years. Katz has had success garnishing a debtor’s wages — but it’s not always an easy process.

“I have hired private investigators to stake out homes and offices and follow the debtors’ trucks in the morning to find out where they are working, and then garnished those individuals for any funds owed to the debtor,” Katz says. “I have taken depositions of third parties to track down assets, and then filed charging orders against LLC’s after I learned the debtor had as low as a 5% membership interest, but after a few quarters, my client was paid in full.”

Judgment liens on personal property vs. real property

Personal property consists of assets like cars, appliances, and furniture, while real property includes land and buildings. In some states, both types of property can be used to satisfy a judgment lien. Others only allow real property to be used in the collection of a judgment lien. 

In Texas, for example, you can’t lien a person’s primary residence, but you can file a lien on their fifth cow! There are also provisions on what vehicles you can file against. With crazy laws like these on the books, it pays to read them before you file.

Once a contractor or supplier is awarded a judgment in a court case, a judgment lien is recorded in the same county where the case was heard. In some states a judgment lien is automatically filed at the same time as the judgment, but in others the judgment creditor has to file the lien once the judgment has been handed down. Judgment liens generally expire in 7 to 10 years, but many states allow them to be renewed if they haven’t been collected.

“There is no sweeter sound than the sound of a sheriff’s voice…letting you know they have tow trucks on the way to hook up vehicles from a debtor.”

Thea Dudley, Credit Overlord’s Guide to Credit & Collections

Judgment liens should be filed in multiple counties if you know or believe the debtor may have assets located there (think of real property — vacation homes, second homes, investment properties). Some states have what is known as a “blanket” lien; check with your attorney or the court clerk to see if this is available. 

The description of property in a judgment lien may be specific, or it may use general language like “all personal property” or “all real property.” 

How property becomes cash

When a judgment lien is attached to real property, the creditor collects when the debtor attempts to sell the property or refinance their loan, as the judgment lien will show on a title report, or when the creditor forecloses on the lien.

Although the lien doesn’t have to be paid at the time of sale or refinancing, most financing companies and new property owners want all the liens cleared from a property before they purchase it. The debt is paid through the proceeds from the sale or refinance.

For personal property, where there is no title or other proof of ownership to attach to, it’s nearly impossible to collect on the lien unless the parties purchasing the property do the research to see if there are any encumbrances on the owner’s property. 

Because of this, personal property liens can be more difficult to collect because most people don’t do the research. The only exception would be a vehicle sale, where the lien is attached to the title and can be found through title research. However, an attorney familiar with construction credit will be very comfortable with performing an asset and liability search to help you discover if there are any outstanding judgment liens.

“This is where knowing your debtor and having done research on them will come in handy,” Thea writes. “What hobbies does the debtor engage in? Is he a hunter (aka, has guns), has stocks to liquidate, boats, ATVs, trailers, equipment, real property? Start making suggestions that get the debtor thinking.“

Thea Dudley teaches credit & collections

Join the free certificate course to learn the foundations of credit & collections in construction with 30-year industry veteran Thea Dudley.

Beware the homestead exemption

Many states have exemptions for primary residences that make the sale of homes for this type of debt difficult. These exemptions are called homestead exemptions, and they specify a certain amount of the proceeds that have to be returned to the debtor after the sale of their property. These exemptions, combined with mortgage liens, may mean that a creditor won’t receive any money, even if they force a sale.

Using a judgment lien on property in another state

It’s not uncommon for a debtor to move their property to another state in order to hide it from the creditor or courts. Assuming that you have done your research, and identified property out of state that belongs to the debtor, you can use it to collect on your lien. 

But because a judgment lien is specific to the state in which it was filed, in order to recover out-of-state property the creditor needs to take an extra step known as “domesticating a foreign judgment.” 

“If the debtor has real property or is living or working in another state, you may have to domesticate your judgment in that state so you can attach to that property or garnish wages,” Thea writes. “Domestication is a fairly easy process that, once again, your attorney can help with. As a simplified explanation, you are just getting one state to recognize the ruling of another state and uphold it.”

Most states have adopted the Uniform Enforcement of Foreign Judgments Act, which makes the domestication process easier — you just have to file your judgment with the property records in that state, which gives “full faith and credit to the judgments of courts of other states.” 

You can still collect on property in states that haven’t adopted the uniform code, but it may require a few extra steps (and the help of a lawyer). 

What is the difference between a judgment lien and a mechanics lien?

A mechanics lien is a lien filed by a contractor or material supplier to collect a debt that was incurred as a result of construction work on a property. Contractors and material suppliers have a statutory right to file a mechanics lien if they aren’t paid for their work. Judgment liens work in a similar fashion, but there are some key differences you should know about.

A judgment lien can apply to any property a person or company owns, including in another county. A mechanics lien is limited to the property where the work was performed or materials supplied. A judgment lien gives creditors more flexibility by allowing them to secure their debts using multiple properties. For example, a judgment lien could be filed against a house in one county and a commercial building in another, as long as they were owned by the same person or business entity.

A judgment lien can be levied against bank accounts and other types of property, while a mechanics lien can only attach to real property. A judgment lien can be attached to a debtor’s car, furniture, or other assets (like cows), not just a building or property.

It’s important to note that a mechanics lien can be turned into a judgment lien through the process of foreclosure. If a lawsuit is filed to satisfy a mechanics lien, and the creditor wins the suit, a judgment lien can be filed to secure payment.

Use your best judgment — and keep collecting

Judgment liens are a useful tool to protect creditors and their right to get paid. But they aren’t a silver bullet — you still need to take steps to collect on that judgment lien.  

“It is important to remember that just because a client wins a lawsuit and obtains a judgment, it does not mean that the judgment will be easy to collect,” says Scott Grier, a construction attorney in the Midwest. “Before ever engaging in litigation, I strongly encourage each client to weigh the time and money cost of litigation against the likelihood of collecting on a judgment against the judgment debtor.”

At the same time that you’re enforcing your judgment lien, don’t forget that your end goal is to get paid. Keep talking to the debtor to find a solution that works for both of you. 

“Once you go through this process, simply picking up the phone and talking to the object of your affection may not have entered your mind,” Thea writes. “Amazingly enough, it sometimes works. Call the judgment debtor (your “customer”) directly, no attorney, and ask for payment on the judgment.

“Consider giving your judgment amount a haircut to get the debtor to settle with you. Shave up some interest or attorney fees. Make sure you give the figures of what those are up front. If interest was granted at 6% pre-judgment interest and at 18% post-judgment interest, take the time to do the calculations to present to the debtor.”

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