What Happens to Judgment Liens During Foreclosure?

If you're sued in court for a sum of money and lose the case, the prevailing party will get a judgment. That party may then file a judgment lien, which is a lien that attaches to your real estate. In most cases, a judgment lien remains on the property's title until you sell or refinance your house. When you sell or refinance, the lien is paid off. Once the judgment lien is paid, a release or satisfaction of judgment is recorded in the land records, which clears the title to the property.

But what happens to a judgment lien if you don't make your mortgage payments and go through a foreclosure? If you lose your home to a lender's foreclosure, the judgment lien is typically wiped out, assuming that the lien doesn't have priority.

Whether the judgment lienholder will get paid anything after a foreclosure sale depends on whether any money is left over after senior mortgage holders and priority liens are paid off.

How Judgment Liens Attach to Real Estate

A "judgment lien" is usually created when a copy of the judgment is recorded in the county land records. The judgment will typically be filed in the land records of the county where:

• you currently own real estate, or
• where you might acquire real estate in the future.

So, the judgment lien attaches to any real estate you currently own, and it will also attach to any real estate that you later acquire.

Judgment Lien Priority

Generally, the priority of a judgment lien is determined by its recording date. A basic legal principle states, "first in time, first in right." The priority of liens determines who gets paid first after a foreclosure.

However, sometimes the recording date doesn't matter. For example, judgment liens are always junior to property tax liens.

Judgment liens are also usually junior to a first mortgage and possibly a second mortgage, as well as perhaps other judgment liens that other creditors previously filed.

Mortgage Foreclosures and Judgment Liens

In a mortgage foreclosure, the foreclosure process eliminates any judgment liens that were recorded after the mortgage.

Any surplus funds after the foreclosing lender's debt is paid get distributed to other creditors that hold junior liens, like second mortgages and judgment lienholders.

Do Judgment Lienholders Foreclose?

A judgment lienholder can foreclose on your home to get paid. But judgment lienholders rarely foreclose because of the time and money needed to complete the process.

Often, they wouldn't get anything from foreclosing because senior mortgages or other liens have priority and get paid first.

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