Not infrequently, a judgment creditor will find that he, she, or it have been served with papers in a mortgage foreclosure case. This can be unnerving for a business or creditor that is unfamiliar with the process. Your involvement in the foreclosure case is a by-product of the fact that your judgment automatically creates a judgment lien in your favor on real property owned by the debtor in the county where you received your judgment. (You can obtain a similar lien in other counties, but it requires additional action on the part of the creditor.)
Under normal circumstances, receiving the benefit of a judgment lien against the judgment debtor’s real estate is a feature, not a bug. But when you get served with papers as a defendant, it can be startling. Usually, however, this is not cause for concern. In the foreclosure process, the mortgage holder or other person seeking to foreclose an interest in land has to name everyone with an interest in the property. This protects you as a judgment lien holder in case your lien is superior to the person bringing the foreclosure action or if the debtor has equity over and above the amount owed creditor(s) with the higher priority lien(s).
In the typical case, what the creditor will want to do is to file a response to the complaint stating the date and amount of your judgment, acknowledging – where appropriate – that your interest is inferior to the mortgage holder (or whoever is bringing suit), and requesting that the court pay your lien in its proper order of priority. Unfortunately, in the majority of cases, the debtor is under water on his or her real estate. In other words, the value of the property is less than the amount he or she owes to the bank on the note. In that case, most of the time, your lien will be wiped clean and the bank will take possession of the real estate at Sheriff’s sale. But, occasionally, responding to the complaint and asserting your judgment lien will pay off.
Have questions about a judgment lien? Contact us.